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American Economic Review: Vol. 100 No. 1 (March 2010)

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The Effect of Medicare Part D on Pharmaceutical Prices and Utilization

Article Citation

Duggan, Mark, and Fiona Scott Morton. 2010. "The Effect of Medicare Part D on Pharmaceutical Prices and Utilization." American Economic Review, 100(1): 590-607.

DOI: 10.1257/aer.100.1.590

Abstract

Medicare Part D began coverage of prescription drugs in 2006. Rather than setting pharmaceutical prices, the government contracted with private insurers to provide drug coverage. Theory suggests that additional insured consumers will raise the optimal price of a branded drug, while the insurer's ability to move demand to substitute treatments may lower prices. We estimate the program's effect on the price and utilization of pharmaceutical treatments. We find that Part D enrollees paid substantially lower prices than while uninsured, and increased their utilization of prescription drugs. We find relative price declines only for drugs with significant therapeutic competition. (L18, L11, L65)

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Authors

Duggan, Mark (U MD)
Scott Morton, Fiona (Yale U)

JEL Classifications

I18: Health: Government Policy; Regulation; Public Health
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L65: Chemicals; Rubber; Drugs; Biotechnology


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