This paper analyzes the regulation of payment schemes for health care providers competing in both quality and product differentiation of their services. The regulator uses two instruments: a prospective payment per patient and a cost reimbursement rate. When the regulator can only use a...

Reference price systems for prescription drugs constitute widely adopted cost containment tools. Under these regimes, patients co-pay a fraction of the difference between a drug's pharmacy retail price and a reference price that is set by the government. Reference prices are either externally...