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U.S. pharmaceutical policy in a global marketplace
Darius N Lakdawalla1, Dana P Goldman, Pierre-Carl Michaud
1Bing Center for Health Economics, RAND in Santa Monica, California, USA. darius@rand.org
Health Affairs (Project Hope)
|December 18, 2008
Summary
Lowering U.S. pharmaceutical prices may yield modest benefits or significant costs. Publicly financing consumer price reductions offers consistent advantages without impacting manufacturer prices.
Area of Science:
- Health economics
- Pharmaceutical policy
- Welfare analysis
Background:
- U.S. pharmaceutical revenue per capita exceeds European levels.
- This disparity prompts policy discussions on U.S. pharmaceutical spending and price controls.
Purpose of the Study:
- To analyze the welfare impacts of reducing U.S. pharmaceutical prices to European levels.
- To assess how these impacts vary based on different modeling assumptions.
Main Methods:
- Microsimulation modeling approach.
- Analysis of welfare effects under varying price control scenarios.
Main Results:
- Price controls show modest benefits under the most favorable assumptions.
- Alternative assumptions reveal price controls can incur costs an order of magnitude higher.
- Publicly financing consumer price reductions, without altering manufacturer prices, consistently yields benefits.
Conclusions:
- The economic consequences of U.S. pharmaceutical price controls are highly sensitive to modeling assumptions.
- Public financing of consumer price reductions presents a more reliably beneficial policy alternative.
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