Are prescribed and over-the-counter medicines economic substitutes? A study of the effects of health insurance on medicine choices by the elderly.

This article examines the influence of insurance coverage on the selection of over-the-counter (OTC) and prescribed (Rx) medicines in treating less serious health problems. Because health insurance policies typically provide no coverage for OTC products, a low list price for an OTC may exceed the after-insurance expense associated with a much higher-priced prescription. Under these circumstances, rational individuals with insurance will choose prescribed medicines even if OTCs are equally effective. Ten common health problems typically managed with either Rx or OTC medicines were selected for analysis. The study population consists of elderly Pennsylvanians surveyed during 1990 who reported suffering one or more of these conditions (N = 2,962). Multivariate analysis confirmed that 1) people with prescription coverage are significantly more likely to medicate a given problem than are those without it; and 2) given the decision to medicate, the presence of insurance significantly increases the level of Rx use and significantly reduces the level of OTC use. As expected, the effect was strongest among people with the most complete prescription insurance coverage. The article discusses the implications of these findings in the context of national health reform and Food and Drug Administration policy regarding Rx-to-OTC switches.