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Towards an Efficient Mechanism for Prescription Drug Procurement

Listed author(s):
  • Kyna Fong
  • Michael Schwarz
Registered author(s):

    This paper applies ideas from mechanism design to model procurement of prescription drugs. We present a mechanism for government-funded market-driven drug procurement that achieves very close to full static efficiency -- all members have access to all but at most a single drug -- without distorting incentives for innovation.

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    File URL: http://www.nber.org/papers/w14718.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14718.

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    Date of creation: Feb 2009
    Handle: RePEc:nbr:nberwo:14718
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    1. Suzanne Scotchmer, 1999. "On the Optimality of the Patent Renewal System," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 181-196, Summer.
    2. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    3. David McAdams & Michael Schwarz, 2006. "Perverse Incentives in the Medicare Prescription Drug Benefit," NBER Working Papers 12008, National Bureau of Economic Research, Inc.
    4. Michael Kremer, 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1137-1167.
    5. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-1946, December.
    6. Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006. "Rewarding Sequential Innovators: Prizes, Patents, and Buyouts," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1041-1068, December.
    7. McAfee, R. Preston, 1992. "A dominant strategy double auction," Journal of Economic Theory, Elsevier, vol. 56(2), pages 434-450, April.
    8. Lakdawalla, Darius & Sood, Neeraj, 2013. "Health insurance as a two-part pricing contract," Journal of Public Economics, Elsevier, vol. 102(C), pages 1-12.
    9. Michele Boldrin & David K. Levine, 2006. "Growth and Intellectual Property," NBER Working Papers 12769, National Bureau of Economic Research, Inc.
    10. Mark Duggan & Fiona M. Scott Morton, 2006. "The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 1-30.
    11. Fiona Scott Morton, 1997. "The Strategic Response by Pharmaceutical Firms to the Medicaid Most-Favored-Customer Rules," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 269-290, Summer.
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