The Rising Price of Anticancer Medicine Based on Social Norm Open Access

Abstract

The price of cancer drugs have been rising rapidly. Current research suggests that pharmaceutical drug companies increase prices of new drugs not only based on improvements in survival benefits but also based on social norm where a company marks up the price of the new drug by comparing the price of an already existing similar drug. Through empirical analysis, the results show that with survival benefits being equal, the more recent a cancer drug has been FDA-approved, the higher the price. The results contribute evidence that pricing mechanism is influenced by social norm. Concerning the fact that Medicare spending on cancer drugs has been expanding expeditiously and is expected to continuously grow, the results also open discussion on how to prevent the rapid rise in cancer drug prices in order to keep Medicare effective and sustainable.

Table of Contents

I. Introduction …………………………………………………………………………………………………………… 1

II. Background and Literature Review ……………………………………………………………………….. 3

The Social Norm in Rising Cancer Drug Prices ……………………………………………………. 3

Market, Institutional, and Legislative Characteristics of Anticancer Medication … 4

Rising Cancer Prices and Medicare's Sustainability ……………………………………………. 9

III. Dataset, Hypothesis, & Empirical Strategy …………………………………….……………………. 11

Dataset …………………………………………………………………………………………………………….. 11

Hypothesis ……………………………………………………………………………………………………….. 12

Empirical Strategy …………………………………………………………………………………………….. 13

IV. Results …………………….………………………………………………………………………………………….. 14

V. Discussion and Conclusion ……………..…….………………………………………………………………. 15

IV. References ……………………….……….…………………………………………………………………………. 18

Table 1. Summary Statistics of Variables …………..……….……………………………………………… 20

Table 2. Direct Summary Statistics ………………………………..…………………………………………… 21

Table 3. Log-linear Regression Model …………..…………………………………………………………… 22

Figure 1. lnPrice and Time …………………………………………………………………………………………. 23

Figure 2. lnPrice and Time for Breast Cancer ………………….…………………………………………. 24

About this Honors Thesis

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School	Emory College
Department	Economics
Degree	BA
Submission	Honors Thesis
Language	English
Research Field	Health Sciences, Public Health Economics, General Sociology, Public and Social Welfare
Keyword	Medicare Cancer drug
Committee Chair / Thesis Advisor	Howard, David H, Emory University
Committee Members	Curran, Christopher, Emory University Hockenberry, Jason Michael, Emory University

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