TY  - JOUR
AU  - Berndt,Ernst R.
AU  - Newhouse,Joseph P.
TI  - Pricing and Reimbursement in U.S. Pharmaceutical Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16297
PY  - 2010
Y2  - August 2010
UR  - http://www.nber.org/papers/w16297
L1  - http://www.nber.org/papers/w16297.pdf
N1  - Author contact info:
Ernst R. Berndt
MIT Sloan School of Management
100 Main Street, E62-518
Cambridge, MA 02142
Tel: 617/253-2665
Fax: 617-227-0880
E-Mail: eberndt@mit.edu

Joseph P. Newhouse
Division of Health Policy  Research and Education
Harvard University
180 Longwood Avenue
Boston, MA  02115-5899
Tel: 617/432-1325
Fax: 617/432-3503
E-Mail: newhouse@hcp.med.harvard.edu
AB  - In this survey chapter on pricing and reimbursement in U.S. pharmaceutical markets, we first provide background information on important federal legislation, institutional details regarding distribution channel logistics, definitions of alternative price measures, related historical developments, and reasons why price discrimination is highly prevalent among branded pharmaceuticals.  We then present a theoretical framework for the pricing of branded pharmaceuticals, without and then in the presence of prescription drug insurance, noting factors affecting the relative impacts of drug insurance on prices and on utilization.  With this as background, we summarize major long-term trends in copayments and coinsurance rates for retail and mail order purchases, average percentage discounts off Average Whole Price paid by third party payers to pharmacy benefit managers as well as average dispensing fees, and generic penetration rates.  We conclude with a summary of the evidence regarding the impact of the 2006 implementation of the Medicare Part D benefits on pharmaceutical prices and utilization, and comment on very recent developments concerning the entry of large retailers such as Wal-Mart into domains traditionally dominated by large retail chains and the "commoditization" of generic drugs.
ER  -