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CBO’s Model of Drug Price Negotiations Under the Elijah E. Cummings Lower Drug Costs Now Act: Working Paper 2021-01

Christopher Adams and Evan Herrnstadt

No 56905, Working Papers from Congressional Budget Office

Abstract: One of the inputs that the Congressional Budget Office used to estimate the budgetary effects of the Elijah E. Cummings Lower Drug Costs Now Act (H.R. 3) is a simulation model of price negotiations. CBO modeled those negotiations using a Nash bargaining framework, which was based on the gains to each party—the government and the manufacturer—from a successful negotiation. The gain to the government was estimated to be the avoided cost of purchasing the next-best alternative treatment, plus the incremental clinical value of using the drug of interest instead of the

JEL-codes: I11 I18 (search for similar items in EconPapers)
Date: 2021-02-04
New Economics Papers: this item is included in nep-ore
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Handle: RePEc:cbo:wpaper:56905