Your patient’s insurance plan requires a $5 copay for the generic drug, with a p
ID: 1204834 • Letter: Y
Question
Your patient’s insurance plan requires a $5 copay for the generic drug, with a price at the pharmacy of $10, that you are prescribing for her. The (virtually equivalent) brand name drug, priced at $160, requires her to pay a 20% copay.
a. The two drugs in this example are (pick one)
__ substitutes for each other
__ complements for each other
___ outputs of production
b. What are these “tiered” prices intended to do for her insurance company’s payout for its policy holders, their premiums, and ultimately health care costs? Comment briefly on how economic theory has been applied to this area of health care consumption.
Now the manufacturer of the brand name drug offers your patient (and other consumers) a “copay card” that will cover up to $30 of the patient’s copay when she purchases their brand drug.
c. What is likely to happen to the total quantity demanded of the generic drug?
d. What is likely to happen to out-of-pocket costs and total drug costs for this segment of drug therapy?
Explanation / Answer
a) The two drugs are substitutes for each other . Because due to insurance plan one gets the same drug but at a lower price .
b)Tiered insurance plan offers insurance with cheaper premiums but with different health providers , because their are different doctors for different tiers .But with low cost there is no assurity about the health quality as such.
There will be fall in the demand for the generic drug .This leads to a rise in the out of pocket expenses for the isurance takers .Which means even after buying insurance they have to make additional costs for getting the coverage .
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