HMPI September 2023: Special Issue Volume 8, Issue 2 Archives

Health Economics Special Issue: Drug Pricing

Drug Pricing in the United States: Theory and Evidence

Special Issue Editors: Mark V. Pauly, Wharton-UPenn, William S. Comanor, UCLA, and H.E. Frech, III, UCSB

The cost of prescription drugs, especially patent-protected brand-name drugs, is at the center of U.S. healthcare debates, even more so now ahead of Medicare’s price negotiations with pharmaceutical firms. The articles in this special issue clarify the relationship between drug pricing and insurer payments, medication value, and drug innovation, offering possibilities for improved public policy and insurance reimbursement. While the focus is on the United States, the authors also consider policy implications for the rest of the world.

Efficiency, Consumer Welfare, and Market Equilibrium in Private Insurance Coverage of Patented Drugs

H.E. Frech, III, UCSB, Mark V. Pauly, Wharton-UPenn, William S. Comanor, UCLA, and Joseph Martinez, Wharton and Perelman School of Medicine, U-Penn

A new model explores the impact of monopoly pricing on insurance coverage and the risk-averse consumer.

Drug Pricing Decisions and Insurance Coverage: Evidence from Medicare Part D

Benedic N. Ippolito, American Enterprise Institute, and Joseph F. Levy, Johns Hopkins Bloomberg School of Public Health

To what extent do the pricing strategies of brand drugs shape insurance coverage and consumer demand?

Decomposition of Pharmaceutical Manufacturer Discounts into Voluntary and Mandatory Discounts for Glucagon-Like Peptide-1 Receptor Agonists

Inmaculada Hernandez, Nico Gabriel, UCSD; Jingchuan Guo, Univ. of Florida; Aryana Sepassi, UCI; Walid F. Gellad, UPMC; Sean Dickson, West Health Policy Center

Mandatory government discounts for type 2 diabetes and obesity medications are growing faster than private sector discounts.

A Direct Measure of Medical Innovation on Health Care Spending: A Condition-Specific Approach

Abe Dunn and Lasanthi Fernando, U.S. Department of Commerce, and Eli Liebman, Terry College of Business, University of Georgia

A substantial portion of spending growth is driven by new technologies that might not only improve treatment outcomes, but also drive spending higher.

The Global Distribution of New Drug R&D Cost: Does the Rest of the World Free Ride?

Angela Chen, Wharton-UPenn, William S. Comanor, UCLA, H.E. Frech, III, UCSB, and Mark V. Pauly, Wharton-UPenn

In the case of new FDA-approved drugs, the rest of the world does make a positive contribution to drug firm profits, albeit a lower one than the U.S.

Arbitrage Deterrence: A Theory of International Drug Pricing

Stephen Salant, University of Michigan

Drug manufacturer safety warnings about prescription drug imports from other high-income countries are unjustified. They deter personal arbitrage and widen the differential between drug prices at home and abroad.

We’re excited to publish this special issue of HMPI focusing on pharmaceutical costs and benefits, a topic that is particularly timely after the Inflation Reduction Act of 2022 provided a new pathway for Medicare to negotiate drug prices. This new program raises a number of questions, including the impact on consumers, taxpayers, innovation, and the private market, aspects of which are addressed in this issue from a health economics angle. We’re grateful to Mark Pauly and the authors of the papers in this issue for their perspectives on this important and fascinating topic. Read more