NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Does Medicaid Pay Too Much for Prescription Drugs? A Case Study of Atypical Anti-Psychotics

Mark G. Duggan

NBER Working Paper No. 9626
Issued in April 2003
NBER Program(s):   HC

During the last several years, government spending on drugs used to treat schizophrenia and other psychotic illnesses has increased at more than 30% per year, with the $3 billion in 2001 Medicaid expenditures exceeding spending in any other therapeutic category. This growth has been primarily driven by a shift to atypical anti-psychotic drugs, which are several times more expensive than the conventional anti-psychotics that preceded them and are purchased almost exclusively by state governments through the Medicaid program. In this paper, I estimate the productivity of these new drugs using a 5% sample of California Medicaid recipients eligible for the program in at least one month between January of 1993 and December of 2001 and diagnosed with schizophrenia during that period. My results indicate that the shift to atypical anti-psychotics has significantly increased government spending, has not reduced the utilization of hospitals or long-term care facilities, and has not improved observable measures of health among Medicaid recipients. The findings suggest that the price of a prescription drug purchased differentially by consumers with Medicaid or other public health insurance may be an inaccurate measure of it value to patients.

download in pdf format
   (891 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (891 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9626

Published: Duggan, Mark. "Do New Prescription Drugs Pay For Themselves?: The Case Of Second-Generation Antipsychotic," Journal of Health Economics, 2005, v24(1,Jan), 1-31.

Users who downloaded this paper also downloaded these:
Duggan and Scott Morton w10930 The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing
Duggan and Evans w11109 Estimating the Impact of Medical Innovation: A Case Study of HIV Antiretroviral Treatments
Encinosa, Bernard, and Dor w15691 Does Prescription Drug Adherence Reduce Hospitalizations and Costs?
Cuellar and Markowitz w12232 Medicaid Policy Changes in Mental Health Care and Their Effect on Mental Health Outcomes
David, Markowitz, and Richards-Shubik w14634 The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us