Chapter 10 A Survey on the Economics of the U.S. Pharmaceutical Industry

Ian McCarthy

A chapter in Current Issues in Health Economics, 2010, pp 201-241 from Emerald Group Publishing Limited

Abstract: With expenditures totaling $227 billion in 2007, prescription drug purchases are a growing portion of the total medical expenditure, and as this industry continues to grow, prescription drugs will continue to be a critical part of the larger health care industry. This chapter presents a survey on the economics of the US pharmaceutical industry, with a focus on the role of R&D and marketing, the determinants (and complications) of prescription drug pricing, and various aspects of consumer behavior specific to this industry, such as prescription drug regulation, the patient's interaction with the physician, and insurance coverage. This chapter also provides background in areas not often considered in the economics literature, such as the role of pharmacy benefit managers in prescription drug prices and the differentiation between alternative measures of prescription drug prices.

Keywords: Abbreviated New Drug Application (ANDA); Average Manufacturer Price (AMP); Average Wholesale Price (AWP); Bayh-Dole Act; Bioequivalence; Brand name drug; Center for Medicare and Medicaid Services (CMS); Chain pharmacy; Clinical trials; Closed formulary; Coinsurance; Compliance; Co-payment; Cost controls; Cost sharing; Detailing; Direct-to-consumer Advertising (DTC Advertising); Disease management; Drug manufacturers; Drug prices; Drug–product substitution; Experience goods; Fee-for-service (FFS); First-mover advantage; Food and Drug Administration (FDA); Formulary; Generic drug; Good Manufacturing Processes (GMP); Hatch-Waxman Act; Health plan; Insurance; Investigational New Drug Application (IND); Mail-order pharmacy; Mail-order prescription drugs; Medicaid; Medicare; Medicare+Choice (M+C); Medicare Advantage; Medicare Modernization Act (MMA); Medicare Part D; Moral hazard; Negative goods; New Drug Application (NDA); Non-retail pharmacy; Original Medicare; Out-of-pocket; Paid search advertising; Patent; Patient; Pharmaceutical; Pharmacy; Pharmacy benefit manager (PBM); Physician; Prescription drugs; Product differentiation; Rebate; Reimbursement; Research and development (R&D); Retail pharmacy; Search costs; Switching costs; Therapeutic class; Third-party insurance; Tiered formulary; Wholesale Acquisition Price (WAC); Wholesaler (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ceazzz:s0573-8555(2010)0000290013

DOI: 10.1108/S0573-8555(2010)0000290013

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