In 1973 the federal government moved to limit drug reimbursement to providers in federally sponsored or supported programs, to the lowest cost at which the drug is generally and consistently available unless a difference in therapeutic effect can be demonstrated between the brand name and generic drug. This paper examines the political evolution and rationale for this program and explores the issues surrounding the ongoing controversy regarding publicly financed programs offering drug benefits.

The authors speculate that the government's first attempt to control prices of pharmaceuticals, prior to enactment of some form of national health insurance, if successful, will call forth pharmaceutical industry strategies which could negate program benefits.

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