RAND Presents First Victor R. Fuchs Research Award to Team of Economists from Carnegie Mellon University

For Release

July 26, 2007

The RAND Corporation has presented the first Victor R. Fuchs Research Award to a team from Carnegie Mellon University in Pittsburgh for publishing the best research paper with the potential to spawn new research in an underdeveloped area of health economics or health policy.

The $10,000 prize has been awarded to: Martin Gaynor and William B. Vogt of Carnegie Mellon University and the National Bureau of Economic Research; and Jian Li of Carnegie Mellon University. Their prize-winning paper is titled “Substitution, Spending Offsets, and Prescription Drug Benefit Design.”

The paper was published in Forum for Health Economics & Policy, an innovative online journal devoted to timely and important health care issues. It can be found at www.bepress.com/fhep.

“This paper is the first study to demonstrate the benefits of generous drug coverage in a stable, employed population,” said Dana Goldman, director of health economics at RAND and co-editor of Forum. “It confirms what we all expected but could not demonstrate – that encouraging people to take their medicine prevents long-term complications, and ultimately can save a substantial amount of money.”

The paper examined the effects of increased drug co-payments on drug spending and on spending for other medical care. Results showed that increases in drug co-payments caused people to reduce their use of prescription drugs, which led to lower drug costs.

However, the study found that consumers increased their use of other types of medical care as a substitute for prescription drug use. About one-third of the cuts in prescription drug spending were offset by increases in other medical spending, according to the study that examined the experiences of workers insured through 40 large employers from throughout the United States

The award will be given annually by the Bing Center for Health Economics at RAND in honor of Victor R. Fuchs, a member of the Forum's editorial board. Research by Fuchs demonstrated that economic analysis yielded valuable insight not only about medical resource use, but also health-related behaviors.

Fuchs is a Stanford University economics professor who is a member of the Institute of Medicine and a former president of American Economics Association. Funding for the award is provided by the Bing Center's endowment.

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