The Long-Term Impact of Price Controls in Medicare Part D

In "The Long-Term Impact of Price Controls in Medicare Part D," a new scientific paper recently published in Forum for Health Economics and Policy, PHE authors Gigi Moreno, Emma Van Einjdhoven, Jennifer Benner and Jeffrey Sullivan examine the potential impact over time of government price settings for prescription drugs.

Focusing on Medicare Part D, Medicare's outpatient prescription drug program, the PHE team applied the Health Economics Medical Innovation Simulation (a micro-simulation of older Americans) to estimate the long-term impacts of price controls, using pricing in the Federal Veterans Health Administration as a proxy.

PHE's researchers concluded that the social costs of price setting over time can be significant, with a reduction in the number of new drug introductions by as much as 25%. As a result, life expectancy for the cohort born in 1991-1995 would also be reduced by almost two years, relative to the status quo. Overall, the authors concluded that price controls would reduce lifetime welfare by $5.7 to 13.3 trillion dollars (US$2015) for the US population born between 1949-2005.

Authors: G Moreno, E Van Eijndhoven, J Benner, J Sullivan

Source: Forum for Health Economics and Policy

Publication Year: 2017