Heterogeneity in Cost-Sharing and Cost-Sensitivity, and the Role of the Prescribing Physician

In this paper, we use individual level data on purchases of one of the most prescribed categories of drugs (cholesterol-lowering statins) to study the responses of physicians and patients to variation in the cost of drugs. In a sample of first-time statin prescriptions to employees from a group of Fortune 500 firms, we find that copay variation across plans has a relatively small effect on the choice of drug, and this effect does not vary with patient income. After the highly-publicized expiration of the patent for Zocor (simvastatin), however, prescriptions for this drug increased substantially, especially for lower-income patients. Our analysis suggests that physicians can perceive the adherence elasticity of their patients and adjust their initial prescriptions accordingly, but only in response to a large and universal price change. Using prescriber identifiers, we present suggestive evidence that physicians learn about a patient's price sensitivity through their own experience of prescribing to that patient.