Profiting from Most-Favored-Customer Procurement Rules: Evidence from Medicaid-Reference-Cited by-同舟云学术

Profiting from Most-Favored-Customer Procurement Rules: Evidence from Medicaid

Published:2023-05-01 Issue:2 Volume:15 Page:166-197
ISSN:1945-7731
Container-title:American Economic Journal: Economic Policy
language:en
Short-container-title:American Economic Journal: Economic Policy

Author:

Feng Josh¹,Hwang Thomas²,Maini Luca³

Affiliation:

1. Department of Entrepreneurship and Strategy, David Eccles School of Business, University of Utah (email: ).

2. Department of Surgery, Brigham and Women’s Hospital (email: ).

3. Department of Health Care Policy, Harvard University (email: ).

Abstract

Using a difference-in-difference approach, we find that an increase to Medicaid’s minimum drug rebate under the Affordable Care Act in 2010 lowered non-Medicaid drug spending by 2.5 percent. A stylized bargaining model shows that this is likely driven by the interaction of this reform with Medicaid’s “most-favored customer” clause (MFCC). By examining the response of drugs that faced a change in incentives equivalent to the removal of Medicaid’s MFCC, we estimate that removing the Medicaid MFCC would have reduced overall 2010 non-Medicaid drug spending by an additional 3.5 percent, though it would have likely also increased Medicaid spending. (JEL C78, H51, I18, I38, L65)

Publisher

American Economic Association

Subject

General Economics, Econometrics and Finance

Link

https://pubs.aeaweb.org/doi/pdf/10.1257/pol.20200688

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