The effect of health insurance expansion on price and demand for medications among the uninsured.

Social health insurance expansions can affect not only new beneficiaries but also those who remain outside the program. This paper studies these spillovers in the context of Medicare Part D. Increases in insured demand can raise or lower price depending on market conditions: they may increase price when pharmaceutical firms face less elastic demand, but reduce price when demand concentration strengthens bargaining and pass-through in competitive markets. I find that Part D lowered the out-of-pocket unit price paid by Americans under age 65 without prescription drug insurance. Price declines are larger in therapeutic classes more exposed to Part D and in classes with stronger within-class competition, consistent with a demand-concentration channel. Demand increases mainly for generic drugs and among existing users. The implied consumer-surplus gain is roughly $76 per person per year, comprising about $65 from lower price on inframarginal consumption and $11 from additional consumption. Demand responses appear strongest among lower-income, younger, and healthier uninsured individuals, consistent with greater pre-existing non-adherence. Although price fall across several drug classes, demand does not increase significantly for medications associated with greater overuse in the United States, suggesting potentially positive net health spillovers.