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Drug prices under the medicare drug discount card program

Author

Listed:
  • Emin M. Dinlersoz
  • Rubén Hernández-Murillo
  • Han Li
  • Roger Sherman

Abstract

In early 2004, the U.S. government initiated the Medicare Drug Discount Card Program (MDDCP), which allowed card subscribers to obtain discounts on prescription drugs. Pharmacy-level prices were posted on the program website weekly with the hope or promoting competition among card sponsors by facilitating consumer access to prices. A large panel of pharmacy-level price data collected from this website indicates that price dispersion across cards persisted throughout the program. Prices declined initially when consumers were choosing cards, but rose later when subscribers were restricted to commit to their card choices. In contrast, contemporaneous prices from online drug retailers, which were unrelated to the program, rose steadily over time, indicating that program prices evolved in a way different from the general evolution of prices outside the program.

Suggested Citation

  • Emin M. Dinlersoz & Rubén Hernández-Murillo & Han Li & Roger Sherman, 2008. "Drug prices under the medicare drug discount card program," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 643-666.
  • Handle: RePEc:fip:fedlrv:y:2008:i:nov:p:643-666:n:v.90no.6
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    References listed on IDEAS

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    Keywords

    Drugs ; Medical care; Cost of;

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