TY  - JOUR
AU  - Santerre,Rexford
AU  - Vernon,John A.
TI  - Assessing Consumer Gains from a Drug Price Control Policy in the U.S.
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11139
PY  - 2005
Y2  - February 2005
UR  - http://www.nber.org/papers/w11139
L1  - http://www.nber.org/papers/w11139.pdf
N1  - Author contact info:
Rexford Santerre
Finance Department
School of Business Building
University of Connecticut
Storrs Campus
2100 Hill side Road, Unit 1041-41HS
Storrs, CT 06269-1041
Tel: 860/486-6422
Fax: 860/486-0634
E-Mail: REXFORD.SANTERRE@uconn.edu

John Vernon
University of North Carolina at Chapel Hill
Department of Health Policy & Management
1101C McGavran-Greenberg Hall
Chapel Hill, NC 27599-7411
Tel: 919/966-8930
E-Mail: vernon@email.unc.edu
AB  - This paper uses national data for the period 1960 to 2000 to estimate an aggregate private consumer demand for pharmaceuticals in the U.S. The estimated demand curve is then used to simulate the value of consumer surplus gains from a drug price control regime that holds drug price increases to the same rate of growth as the general consumer price level over the time period from 1981 to 2000. Based upon a 7 percent real interest rate, we find that the future value of consumer surplus gains from this hypothetical policy would have been $319 billion at the end of 2000. According to a recent study, that same drug price control regime would have led to 198 fewer new drugs being brought to the U.S. market over this period. Therefore, we approximate that the average social opportunity cost per drug developed during this period to be approximately $1.6 billion. Recent research on the value of pharmaceuticals suggests that the social benefits of a new drug may be far greater than this estimated social opportunity cost.
ER  -