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Lagged-Price Reimbursement Contracts: The Impact of Medicare Part B on Pharmaceutical Price Growth

Angelique Acquatella, Keith Marzilli Ericson and Amanda Starc

No 31834, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine cost-plus lagged-price reimbursement contracts, focusing on Medicare Part B's payment for physician-administered drugs. Our theoretical model shows that lagged-price reimbursement can raise launch prices but lower prices in later periods. While previous research showed Part B increased launch prices, we estimate its effect on later prices (net of rebates). Drugs more exposed to Medicare have lower price growth. A drug with above median Part B exposure has a 10% lower price after 3 years than a below median exposure drug that launched at the same price, with a larger effect for newly approved molecules.

JEL-codes: H57 I11 (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-cta and nep-hea
Note: AG EH
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