As pharmaceutical expenditure continues to rise, third-party payers in most high-income countries have increasingly shifted the burden of payment for prescription drugs to patients. A large body of literature has examined the relationship between prescription charges and outcomes such as expenditure, use, and health, but few reviews explicitly link cost sharing for prescription drugs to efficiency and equity. This article reviews 173 studies from 15 high-income countries and discusses their implications for important issues sometimes ignored in the literature; in particular, the extent to which prescription charges contain health care costs and enhance efficiency without lowering equity of access to care.

An understanding of the relationship between cost sharing and drug consumption depends on consistent and unbiased price elasticity estimates. However, there is wide heterogeneity among studies, which constrains the applicability of elasticity estimates for empirical purposes and policy simulation. This paper attempts to provide a corrected measure of the drug price elasticity by employing meta-regression analysis (MRA). The results indicate that the elasticity estimates are significantly different from zero, and the corrected elasticity is -0.209 when the results are made robust to heteroskedasticity and clustering of observations. Elasticity values are higher when the study was published in an economic journal, when the study employed a greater number of observations, and when the study used aggregate data. Elasticity estimates are lower when the institutional setting was a tax-based health insurance system.

Although a growing literature examining the relationship between income and health expenditures suggests that healthcare is a luxury good, this conclusion is debatable owing to heterogeneity of the existing results. The paper tests the luxury good hypothesis (namely that income elasticity exceeds 1) by using meta-regression analysis, taking into consideration publication selection and aggregation bias. The findings suggest that publication bias exists, which is a result that is robust to the meta-regression model employed. Publication selection and aggregation bias also appear to play a role in the generation of estimates. The corrected estimates of income elasticity range from 0.4 to 0.8, which cast serious doubt on the validity of the luxury good hypothesis.

The rise in health expenditure in the U.S. has generated interest in the determinants of health expenditure at the micro-level; however, individuals may exhibit differential behaviour across different types of health care. In addition, public and private insurance may have an heterogeneous effect on expenditure. In this paper, we examine the determinants of health expenditure with a multivariate regression model along with controls for insurance choice and unobserved health care utilization. We find age-related effects and evidence of moral hazard related to private insurance, while the primary effect of income on expenditure appears to be through the purchase of insurance. The implications of the study are that: (i) policymakers should be less concerned about the effect of ageing on health expenditure; (ii) drug spending may not be related to the expansion of public insurance coverage; and (iii) income may have a negative impact on most elements of health spending.

This chapter investigates the effect of health insurance coverage on the use of relatively new prescription drugs. It focuses on statins, a class of lipid-lowering drugs that were considered a major breakthrough after a number of important clinical trials were published. The chapter is organized as follows: Section 2firstly it briefly reviews the literature on technology diffusion and the relationship between insurance and consumption, and also covers the institutional setting in the United States. Next it offers a model of pharmaceutical adoption. The next section provides the results of the analysis. Finally it concludes with a discussion of the results and the policy implications.