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The relationship between costs and health benefits of branded pharmaceuticals remains controversial. This paper examines the incremental costs incurred for incremental health benefits gained from the largest available sample of cost-effectiveness studies of branded drugs in the USA, the 1994–2015 Tufts Registry of Cost-Effectiveness Analyses. Earlier studies used small, specialized samples of drugs. We use linear regression analysis to estimate the association in those studies between additional quality-adjusted life years (QALYs) and incremental pharmaceutical costs. The preferred sample uses 476 studies involving branded pharmaceuticals with both higher costs and increased effectiveness compared to the previous standard of care. Regressions of costs on QALYs imply that an additional QALY is associated, on average, with a $28,561 increase in cost (95 % CI, $18,853–$38,270). This regression explains 20 % of the variation in sample costs. In this analytical sample, a share of the variation in the cost of pharmaceuticals is, therefore, not random but rather associated with variation in QALYs; prices are to some extent "value-based." Our results are robust to varying sample inclusion criteria and to the funding source. In subgroup analyses, the highest cost per QALY was $44,367 (95 % CI, $35,373–$53,361). Costs of pharmaceuticals in this data set are, on average, lower than common estimates of the monetary value of a QALY to American consumers. As in other studies, we find that sellers of patent-protected beneficial new technology appear to capture only a fraction of the benefits provided. [ABSTRACT FROM AUTHOR]

Background: Rankings from the World Health Organization (WHO) place the US health care system as one of the least efficient among Organization for Economic Cooperation and Development (OECD) countries. Researchers have questioned this, noting simplistic or inappropriate methodologies, poor measurement choice, and poor control variables. Our objective is to re-visit this question by using newer modeling techniques and a large panel of OECD data.Methods: We primarily use the OECD Health Data for 25 OECD countries. We compare results from stochastic frontier analysis (SFA) and fixed effects models. We estimate total life expectancy as well as life expectancy at age 60. We explore a combination of control variables reflecting health care resources, health behaviors, and economic and environmental factors.Results: The US never ranks higher than fifth out of all 36 models, but is also never the very last ranked country though it was close in several models. The SFA estimation approach produces the most consistent lead country, but the remaining countries did not maintain a steady rank.Discussion: Our study sheds light on the fragility of health system rankings by using a large panel and applying the latest efficiency modeling techniques. The rankings are not robust to different statistical approaches, nor to variable inclusion decisions.Conclusions: Future international comparisons should employ a range of methodologies to generate a more nuanced portrait of health care system efficiency. [ABSTRACT FROM AUTHOR]

This article discusses the economics of predatory pricing and how the developing case law in the U.S. Ninth Circuit on the measurement of costs leads to improper decisions from an economic perspective. It analyzes the interpretation of the Ninth Circuit on the cases Marsann Co. versus Brammall Inc. and its progeny, William Inglis and Sons Baking Co. versus Continental Baking Co. Inc., and the implications of those rulings on the case Thales Avionics Inc. versus Matsushita Avionics System Corp.

The article presents an economic assessment of damage caps in medical malpractice litigation imposed by state laws and the implications for federal policy and law in the U.S. Many states have enacted laws that serve to limit non-economic damage awards for medical liability claims. These laws were put into effect in the hope of controlling liability insurance costs, thereby reducing medical costs to consumers and preserving or increasing access to healthcare for individuals.

Examines the relative impact of the different policy changes designed to promote private health insurance in Australia. Policy changes in private health insurance that were introduced over a three-year period; Estimate on the impact of the successive policy changes; Increase in insurance coverage.

Taking an evolutionary view, Harold Demsetz hypothesized that firms differ persistently in efficiency and that industry concentration results from growth of efficient firms at the expense of inefficient ones. We test this idea with microdata from the hospital industry. Initial hospital efficiency and subsequent growth (and profitability) are significantly and positively related. Also, greater initial variation in hospital efficiency within local markets is positively related to subsequent growth in market concentration. Our findings support the evolutionary efficiency hypothesis, though they cannot confirm the stronger idea that variation in efficiency is the dominant explanation for changes in concentration. (JEL L11, L84, I11, L31, L20) [ABSTRACT FROM AUTHOR]

Using a model like that of Klein and Leffler's, we demonstrate theoretically that a manufacturer's desire to signal relative quality differences by relative retail price differences may be thwarted by the misleading markups of independent retailers. Resale price maintenance is one instrument that a manufacturer can use to avoid this problem. We present empirical evidence from a recent antitrust case in which forcing a manufacturer to drop resale price maintenance did lead to mis-leading (and also higher) markups. [ABSTRACT FROM AUTHOR]

The article examines some of the measurement problems which affected the study of optimal scale in physician practice and the relative efficiency of solo versus group practices through a survivor analysis. It was observed that the optimal size distribution of medical practice based on private costs and benefits will have more groups in the size ranges determined to be most efficient at the margin and less physicians in solo practice. It is also possible that optimal practice situations have more prepaid groups and more multispecialty groups.

Presents information on the development of a model which examines the effects of increased competition on firm survival and growth rates, focusing on the hospital industry in California in the 1980's. What are some of the problems which affecting competition; Information on data used in the Californian study; Details on some firm-specific factors.

In this paper we develop the implications of the property rights theory of the firm for wage determination and test the model using data from the U.S. nursing home industry. The main theoretical prediction is that any attenuation of property rights will lead to higher wage rates for the firm's employees. The empirical evidence indicates that, indeed, profit-maximizing nursing homes do pay the lowest wage rates (for given quality labor), and that the stronger the cost- minimizing incentives provided by Medicaid reimbursement programs, the lower the wage rate paid by these nursing homes. [ABSTRACT FROM AUTHOR]

Economists Frank Mathewson and Ralph Winter (MW) assume that "two manufacturers sell products to a large number of retailers" or distributors. Furthermore, one of these firms is "dominant" in that he "captures the market" if he imposes exclusive dealing and still makes positive profits. Therefore, the dominant firm's profit function cannot be duplicated by either a second producer or an entrant to the market. These conditions are similar to our own. The structure of substitution between the products of the two producers distinguishes the MW model from ours. Theft structure is more general and therefore has less economic content. In the MW model, the dominant manufacturer might be required to set a lower wholesale price to assure that his distributors accept exclusive dealing. Although the two studies formally give similar results, MW provide less indication of where exclusive dealing arrangements are likely to be found. Yet, both agree that exclusive dealing is more likely where the product differentiation advantages of the leading firm are greater.

The private health insurance industry is large and important. As discussed by researcher Karen Davis, it figures prominently in several plans for national health insurance. However, very little is known about the degree of competition in that industry or the effect that competition has on insurance and medical markets. This article will examine theoretically and empirically the impact of varying degrees on competitiveness in this industry. In particular, the effects on the completeness of insurance (the proportion of expenses paid by the insurer) and thus medical demand will be studied. The health insurance industry contains some national firms, but it does not operate in a national market. Entry into each state requires a license from the state government. Issuance of a license is contingent on meeting a number of state regulations concerning rate regulation, levels of reserves and so on. Firms which are not based in the state often must pay a discriminatory tax to sell insurance in the state. Most importantly, the dominant Blue Cross and Blue Shield firms are organized on a state-by-state basis. Thus, the competitiveness of health insurance must be gauged at the state level. This provides a natural experiment to test the effects of differing amounts of competition.

In this paper we take a view of advertising and certain other nonprice competition as public goods. This leads to a new fundamental justification of the zero price distribution of advertising, coupled with a mark-up of the advertised good as a disguised form of price discrimination which approximates that required for efficient pricing of a public good. Further, we present a numerical counterexample wherein the commonly-observed zero price distribution of advertising is shown to lead to higher consumer and seller welfare than its separate sales at cost. [ABSTRACT FROM AUTHOR]

This paper shows that the disagreement has its roots in a confusion of liability rules and property rights. A simple general equilibrium model is used to show that the Theorem is correct for property rights assignments, but not for liability rules. Liability rules are shown to be, in effect, incomplete property rights, which leads to inefficiency. [ABSTRACT FROM AUTHOR]

The impact of public health insurance on price and output of medical care is analyzed within the context of monopolistic markets for health services. An important result, which is not obtained in competitive markets, is that indemnity benefits cause smaller price increases than service benefits, both directly and indirectly through the effect of benefit structure on the production of information. Various types of price regulation are considered, including limitation to "usual, customary, and prevailing" levels, a frequently used technique. With a simple dynamic model this type of regulation is shown to cause chronic price inflation. [ABSTRACT FROM AUTHOR]

Governments sometimes impose price controls and nonprice rationing-by-queuing. Profit-seeking firms occasionally ration by putting their customers on ‘allocation.’ Following Barzel [1974] and Deacon and Sonstelie [1985], we take the decision to ration as a given and analyze it, employing standard microeconomics and applied welfare economics. This paper adds to the literature by focusing on optimally rationing a good across markets. Further, we estimate the actual welfare cost of improper allocation across markets in the U. S. gasoline crises of 1973–1974 and 1979. [ABSTRACT FROM AUTHOR]

The author discusses U.S. expenditures on pharmaceuticals. He tackles the controversy on U.S. spending on drugs and on the sale of drugs by pharmaceutical companies, the difference between the branded and the generic pharmaceutical industry in terms of sales, the impact of price and quantities on drug expenditures, the U.S. payment system for pharmaceuticals and the impact of drug consumption on health.

The article presents a comment on an article titled, Metropolitan Interpersonal Income Inequality, written by Barbara B. Murray. She considers the extent of intra-urban income inequality and the factors explaining differences in inequality among metropolitan areas. Professor Murray hypothesizes that income level, size, and regional characteristics consisting of racial composition, rural-urban population proportions, and industry mix, explain variance in inequality over the units. By direct comparison of rank orderings, correlates are found between income inequality and each of the individual determinants. The choice of analytical technique, however, precludes the possibility of assessing the importance of the determinants in affecting inequality or the a planatory power of any single determinant in relation to any other determinant. The purpose of this comment is to supply additional empirical evidence, which largely supports Professor Murray's findings, and to amplify the economic causes underpinning the observed relationships.

In this article, the author offers comments on the increases in patient cost-sharing revealed in the survey of large employers, employee benefit consultants, and managed care executives. He contends over the take of the authors who have revealed the results indicating the increase as bad news, and emphasizes the "moral hazard" effect. He states that although the healthcare system has problems, yet it has an advantage that lies in the competitive interaction of buyers and insurers.

Comments on the recurring policy disputes over vertical relations in gasoline distribution and retailing. Complaints of independently-owned franchised dealers of being treated differently than refiner-owned dealers; Regulations in American states.