Health and Social Welfare Review Vol.37 No.2, pp.577-601
Abstract
The policy on the upper price limit for off-patent drugs was implemented in April 2012 to help reduce the burden of drug costs. We tried to investigate whether there were changes in the price elasticity before and after the implementation of the policy, based on national health insurance cohort data. Drug usage and drug prices of 230 diabetic oral medications prescribed were extracted on a quarterly basis from the National Health Insurance cohort in 2011-2013. The price elasticity was estimated using the Random Effect 2-stage Least Square model. The elasticity of generic drugs was -0.78 before the implementation of the policy, and -0.69 after it. There was a statistically significant difference. The price elasticity of the original drug was -0.56, -0.54 before and after but not different from each other. This study is the first empirical study to estimate the price elasticity of prescription drugs in Korea. The price elasticity of generic drugs decreased since the policy was executed. Price cuts in generic drugs drive the use of generic drugs less. As this study included only diabetic drugs, the result may not be generalized. However, estimating price elasticity is meaningful in that it can be used as a measure of the effect of the drug price policy. It can also be used as a basis for the development of the policy for promoting the use of generic drugs.
