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Are drug manufacturers taking advantage of older Americans through price discrimination? Several recent congressional studies have investigated this question. They measured the drug-price differentials between cash-paying customers and large HMOs and compared the retail prices paid by consumers in the United States with those paid in Canada and Mexico.

In Price Comparisons for Pharmaceuticals, Patricia M. Danzon analyzes two of the studies--congressionally sponsored minority Staff Reports--to reveal that they are based on flawed methodology. Ignoring inconvenient evidence, the reports grossly overestimate the price differences that they decry.

Danzon shows why drug coverage for seniors is better addressed by private-sector plans than by forcing manufacturers to offer Federal Supply Schedule discounts to the retail sector.

Patricia M. Danzon is the Celia Moh Professor of Health Care Systems and Insurance at the Wharton School at the University of Pennsylvania.