Many public and private healthcare payers use formularies as a tool for controlling drug costs and quality. Although the price per dose is often negotiated as part of the formulary listing, payers may still face unlimited financial risk if demand is much greater than expected at the time of...

Limited use conditions (LUCs) are a method of directing treatment with new drugs to those populations where they will be most cost effective. In this paper we investigate how a drug manufacturer could determine pricing and LUCs to maximize profits. We assume that the payer makes formulary...