A non-trivial fraction of people cannot afford to buy pharmaceutical products at unregulated market prices. Therefore, the paper analyzes the public insurance of the pharmaceutical products in terms of price controls and the socially optimal third-degree price discrimination. It characterizes...

In 1991 a most-favored-customer (MFC) rule was adopted to govern pharmaceutical prices paid by Medicaid. Theoretical models show that an MFC rule commits a firm to compete less aggressively in prices. I find that the price of branded products facing generic competition rose (4% on average)....

I estimate the welfare, both gross and net, provided by the Medicare managed care program in 1999 through 2002. First, I estimate a model of demand for the benefits offered by managed care plans to Medicare beneficiaries. I then use the demand estimates to form estimates of welfare provided by...

Overdose deaths from prescription opioids are on the rise, and policymakers seek solutions to curb opioid misuse. Recent proposals call for price-based solutions, such as opioid taxes and removal of opioids from insurance formularies. However, there is limited evidence on how opioid consumption...

Subsidized health insurance markets use diagnosis-based risk adjustment to induce insurers to offer an equitable benefit to individuals of varying expected cost. I demonstrate that technological change after risk adjustment calibration -- new drug entry and the onset of generic competition --...

A relatively small but influential economics literature is devoted to financial abuse in Medicare.Much of that literature focuses on upcoding/no upcoding for inpatient hospital care inMedicare Part A, where reimbursements requested are greater/the same as justified by the cost of care provided....

In Medicare Part D, low income individuals receive subsidies to enroll into insurance plans. This paper studies how premiums are distorted by the combined effects of this subsidy and the default assignment of low income enrollees into plans. Removing this distortion could reduce the cost of the...

Insurers subcontract with pharmacy benefit managers (PBMs) to administer drug insurance. PBMs typically profit from the difference between a fixed amount and the reimbursement paid to pharmacies (i.e., "spread pricing"). Some states require insurers and PBMs to use cost-plus contracts, in which...

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...

This paper reports on the progress that has been made and questions that have been raised about the new Medicare prescription drug benefit that became law in late 2003. The focus is on issues raised during the National Medicare Prescription Drug Congress held in Washington, DC, in February 2004....