Pricing and Reimbursement in U.S. Pharmaceutical Markets

Ernst R. Berndt and Joseph Newhouse

No 16297, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: D4 I11 I18 L11 L65 (search for similar items in EconPapers)
Date: 2010-08
Note: EH IO PR
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Citations: View citations in EconPapers (7)

Published as Ber ndt, Ernst R. and Joseph P. Newhouse, “Pricing and Reimbursement in U.S. Pharmaceutical Markets”, Chapter 8 in Patricia M. Danzon and Sean N. Nicholson, eds., The Oxford Handbook on the Economics of the Biopharmaceutical Industr y , New York: Oxford University Press, pp. 201 - 265, 2012.

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Working Paper: Pricing and Reimbursement in U.S. Pharmaceutical Markets (2010)
Working Paper: Pricing and Reimbursement in U.S. Pharmaceutical Markets (2010)
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