Outpatient prescription drug prices and insurance coverage: An analysis by therapeutic drug class and user characteristics from the 1996 medical expenditure panel survey

We use a data set which contains information on a nationally representative sample of drug purchases in 1996 to investigate the relationship between the type of insurance individuals have for prescription drugs — private insurance, Medicaid, or uninsured — and both the type of drugs they purchase and the prices they pay for drugs. We find that uninsured persons use more generic drugs than privately insured persons but fewer generic drugs than Medicaid recipients. Overall, uninsured persons purchase drugs whose unit costs are 45% lower than the drugs purchased by privately insured persons and 43% lower than the drugs purchased by Medicaid recipients. Differences in unit costs across insurance types reflect differences in the market basket of drugs they purchase. To compare retail drug prices across insurance types we use standardized prices — the retail unit price of each drug relative to a benchmark price. We final that uninsured individuals pay standardized prices which are, on average, 16.5% higher than the standardized prices paid by privately insured persons, and 8.4% higher than the standardized prices paid by Medicaid recipients.