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Distortionary Effects of Government Procurement: Medicaid Prescription Drug Purchases
National Bureau of Economic Research [NBER] Link to more items from this source
Nov. 29, 2004
Abstract. Excerpt: The federal-state Medicaid program insures 43 million people for virtually all of the prescription drugs approved by the FDA. To determine the price that it will pay for a drug treatment, the government uses the average price in the private sector for that same drug. Assuming that Medicaid recipients are unresponsive to price because of the program's zero co-pay, this rule will increase prices for non-Medicaid consumers.

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