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1 – 10 of over 1000With expenditures totaling $227 billion in 2007, prescription drug purchases are a growing portion of the total medical expenditure, and as this industry continues to grow…
Abstract
With expenditures totaling $227 billion in 2007, prescription drug purchases are a growing portion of the total medical expenditure, and as this industry continues to grow, prescription drugs will continue to be a critical part of the larger health care industry. This chapter presents a survey on the economics of the US pharmaceutical industry, with a focus on the role of R&D and marketing, the determinants (and complications) of prescription drug pricing, and various aspects of consumer behavior specific to this industry, such as prescription drug regulation, the patient's interaction with the physician, and insurance coverage. This chapter also provides background in areas not often considered in the economics literature, such as the role of pharmacy benefit managers in prescription drug prices and the differentiation between alternative measures of prescription drug prices.
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Keywords
- Abbreviated New Drug Application (ANDA)
- Average Manufacturer Price (AMP)
- Average Wholesale Price (AWP)
- Bayh-Dole Act
- Bioequivalence
- Brand name drug
- Center for Medicare and Medicaid Services (CMS)
- Chain pharmacy
- Clinical trials
- Closed formulary
- Coinsurance
- Compliance
- Co-payment
- Cost controls
- Cost sharing
- Detailing
- Direct-to-consumer Advertising (DTC Advertising)
- Disease management
- Drug manufacturers
- Drug prices
- Drug–product substitution
- Experience goods
- Fee-for-service (FFS)
- First-mover advantage
- Food and Drug Administration (FDA)
- Formulary
- Generic drug
- Good Manufacturing Processes (GMP)
- Hatch-Waxman Act
- Health plan
- Insurance
- Investigational New Drug Application (IND)
- Mail-order pharmacy
- Mail-order prescription drugs
- Medicaid
- Medicare
- Medicare+Choice (M+C)
- Medicare Advantage
- Medicare Modernization Act (MMA)
- Medicare Part D
- Moral hazard
- Negative goods
- New Drug Application (NDA)
- Non-retail pharmacy
- Original Medicare
- Out-of-pocket
- Paid search advertising
- Patent
- Patient
- Pharmaceutical
- Pharmacy
- Pharmacy benefit manager (PBM)
- Physician
- Prescription drugs
- Product differentiation
- Rebate
- Reimbursement
- Research and development (R&D)
- Retail pharmacy
- Search costs
- Switching costs
- Therapeutic class
- Third-party insurance
- Tiered formulary
- Wholesale Acquisition Price (WAC)
- Wholesaler
This chapter assesses the doctrine of reasonable interchangeability through the lens of the US Department of Justice’s (DOJ’s) successful effort to enjoin the megamerger of two of…
Abstract
This chapter assesses the doctrine of reasonable interchangeability through the lens of the US Department of Justice’s (DOJ’s) successful effort to enjoin the megamerger of two of the largest national insurance companies, Aetna and Humana. The DOJ focused its challenge on the companies’ Medicare Advantage business, arguing that it is a separate product market from original Medicare and the merger would substantially reduce competition in the market for Medicare Advantage in many geographic markets across the country. The case turned on whether there was reasonable interchangeability between original Medicare and Medicare Advantage in the eyes of consumers. The judge relied on both practical indicia of interchangeability, including evidence of how likely Medicare beneficiaries were to switch between Medicare Advantage and Original Medicare, along with econometric evidence. The decision provides a useful roadmap of how a knowledgeable judge reviewing a merger will consider both Brown Shoe factors and econometric evidence in assessing reasonable interchangeability.
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Li-Lin (Sunny) Liu, Kathryn J. Jervis, Mustafa (Mike) Z. Younis and Dana A. Forgione
The purpose of this study is to examine the association of managerial incentives and political costs with hospital financial distress, recovery or closure. The Medicare Payment…
Abstract
The purpose of this study is to examine the association of managerial incentives and political costs with hospital financial distress, recovery or closure. The Medicare Payment Advisory Commission has stated that hospital closures are important for evaluating the distribution of cost, quality and access to healthcare throughout the US. Using Logistic regression, we demonstrate that hospital closure is associated with low occupancy, return on investment, asset turnover, and lack of affiliation with a multihospital system. It is also significantly associated with urban location, teaching programs, high Medicare and Medicaid patient populations, and high debt. Essential access nonprofit hospitals are less likely to close, while this does not affect governmental and for-profit hospitals. Our research hypotheses are supported by these results.
Kelly Noe and Dana A. Forgione
We examine the association of for-profit (FP) and nonprofit (NP) economic incentives in hospice care providers with financial and nonfinancial metrics of management performance…
Abstract
We examine the association of for-profit (FP) and nonprofit (NP) economic incentives in hospice care providers with financial and nonfinancial metrics of management performance. Controlling for quality of patient care and differences in cost-efficiency, we find that FP providers (1) selectively admit patients with longer life-prognoses and billable days and hence lower average costs per day, (2) employ a lower average cost/skill mix of workers, and (3) have higher CEO compensation and profit. The NP providers admit more patients with the less profitable life-prognoses attributes, have lower CEO compensation, and reinvest their net earnings under the non-distribution constraint. While the profit incentive may be needed to attract providers into this rapidly growing and underserved market, the NP providers return a lower cost per patient served from the taxpayer's perspective.
The purpose of this paper is to present a new method and model for constructing a new decision-making paradigm of Medicare, which can not only satisfy the needs of the sick people…
Abstract
Purpose
The purpose of this paper is to present a new method and model for constructing a new decision-making paradigm of Medicare, which can not only satisfy the needs of the sick people but also reduce the possibility of people slipping back to poverty due to diseases under the policy of Targeted Poverty Alleviation (TPA) of China.
Design/methodology/approach
This paper uses the traditional supply chain theory to analyze the Medicare of impoverished people with the policy of TPA of China and transforms it into a multi-layer supply chain optimization decision-making problem. First, a nonlinear integer programming model for poor people’s Medicare decision with opportunity constraints is constructed. To facilitate the solution of the optimal decision scheme, the abovementioned model is transformed into a linear integer programming model with opportunity constraints by using the Newsvendor model for reference. Meanwhile, the scope of the inventory model is discussed, for it can be combined with the construction of the medical insurance system better. Second, the theoretical model is applied to the practical problem. Finally, based on the results of the theoretical model applying the practical problem, we give further improvement and modification of the theoretical model applies it to the actual situation further.
Findings
This paper presents a theoretical model about determine the optimal the inventory, under the framework of traditional supply chain decision-making, for it can be combined with the construction of the medical insurance system better. The theoretical model is applied to the practical problem of the fight against poverty in XX County, China. By using the actual data and MATLAB, optimal decision scheme is obtained.
Originality/value
There are two aspects of value. On the one hand, this paper provides a new way to construct a Medicare system of impoverished people with TPA of China. On the other hand, this paper tries making a new way to handle the storage of medicines and related medical devices at basic standard clinics decision-making problems based on above mentioned Medicare system.
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This chapter assessed internal and external environmental factors that affect variations in rural hospital profitability with a focus on the impact of the Patient Protection and…
Abstract
This chapter assessed internal and external environmental factors that affect variations in rural hospital profitability with a focus on the impact of the Patient Protection and Affordable Care Act regulations that resulted in the expansion of Medicaid eligibility, as well as four Medicare programs that target rural hospitals. A cross section of 2,114 rural US hospitals operating during 2015 was used. The primary source of data was Medicare Hospital Cost Reports. Ordinary least squares regression with correction for serial correlation, using total margin and operating margin as dependent variables, was employed to ascertain the association between profitability and its correlates.
The mean values for operating margin and total margin were −0.0652 and 0.0259, respectively. Hospital profitability was positively associated with location in a Medicaid expansion state, classification by Medicare as a Critical Access Hospital or Rural Referral Center (total margin only), hospital size, system membership, and occupancy rate. Profitability was negatively associated with average length of stay, government ownership, Medicare and Medicaid share of admissions, teaching status, and unemployment rate.
This chapter found that the Medicaid expansions provided modest help for the financial condition of rural hospitals. However, the estimates for the four targeted Medicare Programs (i.e., Critical Access Hospital, Medicare Dependent, Sole Community Critical Access Hospital, and Rural Referral Center) were either small or not significant (p > 0.10). Therefore, these specially targeted federal programs may have failed to achieve their goals of preserving the financial viability of rural hospitals. This chapter concludes with implications for practice.
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Lawton Robert Burns, Jeff C. Goldsmith and Aditi Sen
Researchers recommend a reorganization of the medical profession into larger groups with a multispecialty mix. We analyze whether there is evidence for the superiority of these…
Abstract
Purpose
Researchers recommend a reorganization of the medical profession into larger groups with a multispecialty mix. We analyze whether there is evidence for the superiority of these models and if this organizational transformation is underway.
Design/Methodology Approach
We summarize the evidence on scale and scope economies in physician group practice, and then review the trends in physician group size and specialty mix to conduct survivorship tests of the most efficient models.
Findings
The distribution of physician groups exhibits two interesting tails. In the lower tail, a large percentage of physicians continue to practice in small, physician-owned practices. In the upper tail, there is a small but rapidly growing percentage of large groups that have been organized primarily by non-physician owners.
Research Limitations
While our analysis includes no original data, it does collate all known surveys of physician practice characteristics and group practice formation to provide a consistent picture of physician organization.
Research Implications
Our review suggests that scale and scope economies in physician practice are limited. This may explain why most physicians have retained their small practices.
Practical Implications
Larger, multispecialty groups have been primarily organized by non-physician owners in vertically integrated arrangements. There is little evidence supporting the efficiencies of such models and some concern they may pose anticompetitive threats.
Originality/Value
This is the first comprehensive review of the scale and scope economies of physician practice in nearly two decades. The research results do not appear to have changed much; nor has much changed in physician practice organization.
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Gregg M. Gascon and Gregory I. Sawchyn
Bundled payments for care are an efficient mechanism to align payer, provider, and patient incentives in the provision of health care services for an episode of care. In this…
Abstract
Bundled payments for care are an efficient mechanism to align payer, provider, and patient incentives in the provision of health care services for an episode of care. In this chapter, we use agency theory to examine the evolution of bundled payment programs in private and public payer arrangements, and postulate future directions for bundled payment development as a key component in the provision and payment of health care services.
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Dana A. Forgione, Melony J. Goodhand and John A. Wrieden
We present a legislative background and assessment of approaches to financing the US Department of Veterans Affairs (VA) healthcare services, and focus on issues related to…
Abstract
We present a legislative background and assessment of approaches to financing the US Department of Veterans Affairs (VA) healthcare services, and focus on issues related to beneficiaries eligible for both VA and Medicare benefits. We refer to a large, VA Medical Center (VAMC) hospital and healthcare complex as a case for comparison of financing approaches. Several legislative proposals had been made to grant the VA funding transfers from Medicare. To date, none has passed in the Congress. Our analysis shows that payments from Medicare would need to be adjusted for the specialized characteristics of VAMC patients, as well as for higher capital costs related to the federal VAMC mandate to maintain reserve capacity for national health emergencies, in order to appropriately apply Medicare payments.
W. David Bradford and James F. Burgess
One of the fundamental tasks in optimal insurance design is mitigating the moral hazard effects inherent in insurance mechanisms. Empirically, relatively little is known about how…
Abstract
One of the fundamental tasks in optimal insurance design is mitigating the moral hazard effects inherent in insurance mechanisms. Empirically, relatively little is known about how individual-level time preferences affect selection of insurance options. We use several waves of the Health and Retirement Survey to explore the relationship between revealed time preferences at the individual level and the selection of insurance options for both the under-age-65 population and the Medicare-eligible population. Our results suggest that time preferences are not likely to be fixed across the life cycle, and that they appear to be important predictors of health insurance decisions.
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