In relating out-of-pocket share to the unit price of a drug, two offsetting forces are at work. The larger the patient's share of a prescription's total cost, the greater is his incentive to search for lower prices. Considering this effect alone, the larger the proportion of the expenditure the patient pays, the lower the expected price. Alternatively, the larger the proportion of the expenditure a third party pays, the greater is its incentive to use its institutional buying power to negotiate lower drug prices. Considering this effect alone, the larger the proportion of the expenditure paid by patients, the higher the expected price.6

If institutional buying power is the more dominant force in the market for drugs, we should find that the price paid rises with the proportion paid out of pocket. If patient incentives are the more important force, lower prices should be associated with higher percentages paid out of pocket. However, since the two forces work in opposite directions, it is possible that the net effect will be insignificant. The various statistical tests we performed show the empirical effects of these two forces.