Health Care Management Papers

Document Type

Journal Article

Date of this Version

3-2010

Publication Source

American Economic Review

Volume

100

Issue

1

Start Page

590

Last Page

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.

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Date Posted: 27 November 2017

This document has been peer reviewed.