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Pharmaceutical Prices with Insurance Coverage and Formularies

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  • Aslam H. Anis

Abstract

In this paper, the author evaluates the success of formulary pricing. Formulary pricing is a price-tendering system used to generate competition among drug suppliers. The paper develops a model of pricing in an uncertain auction from the point of view of a typical firm. The ability to make side-payments in the form of kickbacks to pharmacists segments the transaction into two stages. After the first-stage bidding, the second stage involves a renegotiation between pharmacists and the supplying firm. An econometric test for this model is developed and the empirical evidence is found to support the model well.

Suggested Citation

  • Aslam H. Anis, 1992. "Pharmaceutical Prices with Insurance Coverage and Formularies," Canadian Journal of Economics, Canadian Economics Association, vol. 25(2), pages 420-437, May.
    • Handle: RePEc:cje:issued:v:25:y:1992:i:2:p:420-37
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    Citations

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    Cited by:

    1. Robin Lindsey & Douglas S. West, 1999. "National Pharmacare, Reference-Based Pricing, and Drug R&D: A Critique of the National Forum on Health's Recommendations for Pharmaceutical Policy," Canadian Public Policy, University of Toronto Press, vol. 25(1), pages 1-27, March.
    2. Ferrara, Ida & Missios, Paul, 2012. "Pricing of drugs with heterogeneous health insurance coverage," Journal of Health Economics, Elsevier, vol. 31(2), pages 440-456.
    3. Michel Mougeot & Florence Naegelen, 2018. "Medical service provider networks," Health Economics, John Wiley & Sons, Ltd., vol. 27(8), pages 1201-1217, August.
    4. Aidan Hollis, 2005. "How do Brands’ “Own Generics” Affect Pharmaceutical Prices?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(4), pages 329-350, December.
    5. Paul Grootendorst, 2007. "Effects of 'Authorized-Generics' on Canadian Drug Prices," Social and Economic Dimensions of an Aging Population Research Papers 201, McMaster University.
    6. Aslam H. Anis & Stephanie Harvard, 2015. "A Ban on "Private Label" Generic Pharmaceuticals: Legal and Economic Context," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(2), pages 219-229, July.
    7. Anis, Aslam H. & Wen, Quan, 1998. "Price regulation of pharmaceuticals in Canada," Journal of Health Economics, Elsevier, vol. 17(1), pages 21-38, January.

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