We analyze Medicare Part D's net effect on elderly out-of-pocket (OOP) costs and use of prescription drugs using a dataset containing 1.4 billion prescription records from Wolters Kluwer Health (WKH). These data span the period December 2004-December 2007 and include pharmacy customers whose age as of 2007 is greater than 57 years. The outcomes we examine are OOP cost per day's supply of a medication, the days of medication supplied per capita, and the number of individuals filling prescriptions. We compare outcomes before vs. after January 2006, for those over age 66 years vs. for those age 58-64 years, adjusting for the under-reporting of certain cash-only transactions in the WKH data. Our results indicate that from [2005][2006][2007], Part D reduced elderly OOP costs per day's supply of medication by 21.7%, and increased elderly use of prescription drugs by 4.7%, implying a price elasticity of demand of -0.22. These effects occurred primarily during the first year of the program. An age-and time-standardized comparison of our quantity results with previous estimates from Walgreens data shows that our findings are 2.6 times as large. We conclude that Part D lowered elderly patients' OOP costs substantially and increased utilization modestly, and note that in comparing results across studies on this topic, magnitudes may vary substantially due to differences in data and methods. DataWe analyze a large data set of prescriptions covering the MethodsWe first present nationwide difference-in-difference ( 5We present results for three main outcomes: days' supply, number of patients filling prescriptions, and patient OOP costs per prescription. We also analyzed total prescriptions filled, but we do not report it separately because the results were virtually identical to those for days supply. Because our two utilization outcomes (days supply and number of patients with prescriptions filled) are compared in terms of totals for the two cohorts over time, we must adjust for different rates of mortality for the two cohorts or we could find relative decreases in total use occurring for the older cohort simply due to more deaths. To do this, we normalize our totals by the size of the national population

Under Medicare Part D, senior citizens choose prescription drug insurance offered by numerous private insurers. We examine nonpoor enrollees' actions in 2006 and 2007 using panel data. Our sample reduced overspending by $298 on average, with gains by 81 percent of them. The greatest improvements were by those who overspent most in 2006 and by those who switched plans. Decisions to switch depended on individuals' overspending in 2006 and on individual-specific effects of changes in their current plans. The oldest consumers and those initiating medications for Alzheimer's disease improved by more than average, suggesting that real-world institutions help overcome cognitive limitations. (JEL D14, G22, H51, I13, I18)

This paper describes three prototypical systems of therapeutic reference pricing (RP) for pharmaceuticals-Germany, the Netherlands, and New Zealand-and examines their effects on the availability of new drugs, reimbursement levels, manufacturer prices, and out-of-pocket sur-charges to patients. RP for pharmaceuticals is not simply analogous to a defined contribution approach to subsidizing insurance coverage. Although a major purpose of RPis to stimulate competition, theory suggests that the achievement of this goal is unlikely, and this is confirmed by the empirical evidence. Other effects of RPdiffer across countries in predictable ways, reflecting each country's system design and other cost-control policies. New Zealand's RPsystem has reduced reimbursement and limited the availability of new drugs, particularly more expensive drugs. Compared to these three countries, if RP were applied in the United States, it would likely have a more negative effect on prices of on-patent products because of the more competitive U.S. generic market, and on research and development (R&D) and the future supply of new drugs, because of the much larger U.S. share of global pharmaceutical sales. Disciplines AbstractThis paper describes three prototypical systems of therapeutic reference pricing (RP) for pharmaceuticals-Germany, the Netherlands, and New Zealand-and examines their effects on the availability of new drugs, reimbursement levels, manufacturer prices, and out-of-pocket surcharges to patients. RPfor pharmaceuticals is not simply analogous to a defined contribution approach to subsidizing insurance coverage. Although a major purpose of RPis to stimulate competition, theory suggests that the achievement of this goal is unlikely, and this is confirmed by the empirical evidence. Other effects of RPdiffer across countries in predictable ways, reflecting each country's system design and other cost-control policies. New Zealand's RPsystem has reduced reimbursement and limited the availability of new drugs, particularly more expensive drugs. Compared to these three countries, if RP were applied in the United States, it would likely have a more negative effect on prices of on-patent products because of the more competitive U.S. generic market, and on research and development (R&D) and the future supply of new drugs, because of the much larger U.S. share of global pharmaceutical sales. Executive SummaryThis paper describes three prototypical systems of therapeutic reference pricing (RP) for pharmaceuticals-Germany, the Netherlands, and New Zealand-and examines their effects on the availability of new drugs, reimbursement levels, manufacturer prices, and out-of-pocket surcharges to patients. RP for pharmaceuticals is not simply analogous to a defined contribution approach to subsidizing insurance coverage. Although a major purpose of RP is to stimulate competition, theory suggests that the achievement of this goal is unlikely, and this is confirmed by the empirical evidence. Other effects of RP differ across countries in...

Tech and Yale. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Across a range of contexts, researchers are reevaluating the long-held view that consumers benefit from being offered more options. A leading challenge to this view is the hypothesis that facing more options impairs decision making through a set of phenomena known as "choice overload" (Diehl and Poynor 2010; Iyengar and Lepper 2000), "status quo bias" (Samuelson and Zeckhauser 1988), "inertia" (Dube, Hitsch, and Rossi 2010) and "the paradox of choice" in which "more is less" (Schwartz 2004). Each of these terms carries somewhat different connotations and is ascribed to various underlying economic and psychological causes. Their common predictions, however, are that facing more options makes consumers less satisfied with their available options and with their chosen options and more likely to stay with their status quo, even if the status quo is making no purchase at all. Yet a recent experiment on the elderly population specifically (Besedeš et al. 2012) and a meta-analysis by yield conclusions antipodal to these other frequently cited studies, concluding instead that consumers benefit from additional options.