Assessing consumer gains from a drug price control policy in the U.S.
By: Rexford E. Santerre, John A. Vernon.
Contributors: Vernon, John A.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11139; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11139.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Drugs -- Prices -- Government policy -- United States.; Drug development -- Economic aspects -- United States.; Consumer protection -- United States.
Description: "This paper uses national data for the period 1960 to 2000 to estimate an aggregate private consumer demand for pharmaceuticals in the U.S.  The estimated demand curve is then used to simulate the value of consumer surplus gains from a drug price control regime that holds drug price increases to the same rate of growth as the general consumer price level over the time period from 1981 to 2000.  Based upon a 7 percent real interest rate, we find that the future value of consumer surplus gains from this hypothetical policy would have been $319 billion at the end of 2000.  According to a recent study, that same drug price control regime would have led to 198 fewer new drugs being brought to the U.S.  market over this period.  Therefore, we approximate that the average social opportunity cost per drug developed during this period to be approximately $1.6 billion.  Recent research on the value of pharmaceuticals suggests that the social benefits of a new drug may be far greater than this estimated social opportunity cost"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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