Pricing and Reimbursement in U.S. Pharmaceutical Markets
In this survey chapter on pricing and reimbursement in U.S. pharmaceutical markets, we first provide background information on important federal legislation, institutional details regarding distribution channel logistics, definitions of alternative price measures, related historical developments, and reasons why price discrimination is highly prevalent among branded pharmaceuticals. We then present a theoretical framework for the pricing of branded pharmaceuticals, without and then in the presence of prescription drug insurance, noting factors affecting the relative impacts of drug insurance on prices and on utilization. With this as background, we summarize major long-term trends in copayments and coinsurance rates for retail and mail order purchases, average percentage discounts off Average Whole Price paid by third party payers to pharmacy benefit managers as well as average dispensing fees, and generic penetration rates. We conclude with a summary of the evidence regarding the impact of the 2006 implementation of the Medicare Part D benefits on pharmaceutical prices and utilization, and comment on very recent developments concerning the entry of large retailers such as Wal-Mart into domains traditionally dominated by large retail chains and the "commoditization" of generic drugs.
|Date of creation:||Sep 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kyle Margaret, 2011.
"Strategic Responses to Parallel Trade,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 11(2), pages 1-34, January.
- Garber Alan M & Jones Charles I. & Romer Paul, 2006.
"Insurance and Incentives for Medical Innovation,"
Forum for Health Economics & Policy,
De Gruyter, vol. 9(2), pages 1-27, March.
- Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March.
- Keeler, Emmett B & Newhouse, Joseph P & Phelps, C E, 1977. "Deductibles and the Demand for Medical Care Services: The Theory of a Consumer Facing a Variable Price Schedule under Uncertainty," Econometrica, Econometric Society, vol. 45(3), pages 641-55, April.
- Showalter, Mark H., 1999. "Firm behavior in a market with addiction: the case of cigarettes," Journal of Health Economics, Elsevier, vol. 18(4), pages 409-427, August.
- Ellis, Randall P. & Manning, Willard G., 2007. "Optimal health insurance for prevention and treatment," Journal of Health Economics, Elsevier, vol. 26(6), pages 1128-1150, December.
- Richard G. Frank & David S. Salkever, 1997.
"Generic Entry and the Pricing of Pharmaceuticals,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 6(1), pages 75-90, 03.
- Janet Currie & Brigitte C. Madrian, 1998.
"Health, Health Insurance and the Labor Market,"
JCPR Working Papers
27, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Patricia M. Danzon & Mark V. Pauly, 2002. "Health Insurance and the Growth in Pharmaceutical Expenditures," Journal of Law and Economics, University of Chicago Press, vol. 45(S2), pages 587-613.
- Mark Duggan & Fiona Scott Morton, 2010.
"The Effect of Medicare Part D on Pharmaceutical Prices and Utilization,"
American Economic Review,
American Economic Association, vol. 100(1), pages 590-607, March.
- Mark Duggan & Fiona Scott Morton, 2008. "The Effect of Medicare Part D on Pharmaceutical Prices and Utilization," NBER Working Papers 13917, National Bureau of Economic Research, Inc.
- Frank, Richard G., 2003. "New estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 325-330, March.
- Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
- Joseph A. DiMasi & Henry G. Grabowski, 2007. "The cost of biopharmaceutical R&D: is biotech different?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 469-479.
- Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1261-1303, November.
- Dana Goldman & Tomas Philipson, 2007.
"Integrated Insurance Design in the Presence of Multiple Medical Technologies,"
NBER Working Papers
12870, National Bureau of Economic Research, Inc.
- Tomas J. Philipson & Dana Goldman, 2007. "Integrated Insurance Design in the Presence of Multiple Medical Technologies," American Economic Review, American Economic Association, vol. 97(2), pages 427-432, May.
- David Reiffen & Michael R. Ward, 2005. "Generic Drug Industry Dynamics," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 37-49, February.
- Gruber, Jonathan, 2000. "Health insurance and the labor market," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 12, pages 645-706 Elsevier.
- Peltzman, Sam, 1973. "An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1049-91, Sept.-Oct.
- Patricia Danzon, 1997. "Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(3), pages 301-322.
- Ernst R. Berndt, 2007. "A primer on the economics of re-importation of prescription drugs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 415-435.
- Mark Duggan & Fiona Scott Morton, 2004. "The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing," NBER Working Papers 10930, National Bureau of Economic Research, Inc.
- DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 10(2), pages 107-142, July.
- Ernst R. Berndt, 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 45-66, Fall.
- DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
- Phelps, Charles E & Newhouse, Joseph P, 1974. "Coinsurance, the Price of Time, and the Demand for Medical Services," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 334-42, August.
When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:rwp10-039. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.