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# Forum for Health Economics & Policy

Editor-in-Chief: Goldman, Dana

2 Issues per year

SCImago Journal Rank (SJR) 2015: 0.216
Source Normalized Impact per Paper (SNIP) 2015: 0.197
Impact per Publication (IPP) 2015: 0.222

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ISSN
1558-9544
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30,00 € / $42.00 / £23.00 Get Access to Full Text # The Long-Term Impact of Price Controls in Medicare Part D Gigi Moreno • Precision Health Economics, Los Angeles, CA, USA / Emma van Eijndhoven • Precision Health Economics, Los Angeles, CA, USA / Jennifer Benner • Precision Health Economics, Los Angeles, CA, USA / Jeffrey Sullivan • Precision Health Economics, Los Angeles, CA, USA • : Published Online: 2017-01-20 | DOI: https://doi.org/10.1515/fhep-2016-0011 ## Abstract Price controls for prescription drugs are once again at the forefront of policy discussions in the United States. Much of the focus has been on the potential short-term savings – in terms of lower spending – although evidence suggests price controls can dampen innovation and adversely affect long-term population health. This paper applies the Health Economics Medical Innovation Simulation, a microsimulation of older Americans, to estimate the long-term impacts of government price setting in Medicare Part D, using pricing in the Federal Veterans Health Administration program as a proxy. We find that VA-style pricing policies would save between$0.1 trillion and $0.3 trillion (US$2015) in lifetime drug spending for people born in 1949–2005. However, such savings come with social costs. After accounting for innovation spillovers, we find that price setting in Part D reduces the number of new drug introductions by as much as 25% relative to the status quo. As a result, life expectancy for the cohort born in 1991–1995 is reduced by almost 2 years relative to the status quo. Overall, we find that price controls would reduce lifetime welfare by $5.7 to$13.3 trillion (US\$2015) for the US population born in 1949–2005.

Published Online: 2017-01-20

Citation Information: Forum for Health Economics and Policy. 20160011, ISSN (Online) 1558-9544, ISSN (Print) 2194-6191, January 2017