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Towards an Efficient Mechanism for Prescription Drug Procurement

  • Kyna Fong
  • Michael Schwarz
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    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
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    Handle: RePEc:nbr:nberwo:14718
    Note: HE
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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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. Llobet, G. & Hopenhayn, H. & Mitchell, M., 2000. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Papers 0012, Centro de Estudios Monetarios Y Financieros-.
    3. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
    4. Michele Boldrin & David K. Levine, 2006. "Growth and Intellectual Property," NBER Working Papers 12769, National Bureau of Economic Research, Inc.
    5. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    6. 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.
    7. 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.
    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. McAfee, R. Preston., 1990. "A Dominant Strategy Double Auction," Working Papers 734, California Institute of Technology, Division of the Humanities and Social Sciences.
    10. David McAdams & Michael Schwarz, 2006. "Perverse Incentives in the Medicare Prescription Drug Benefit," NBER Working Papers 12008, National Bureau of Economic Research, Inc.
    11. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-46, December.
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