American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Preferred Pharmacy Networks and Drug Costs
American Economic Journal: Economic Policy
vol. 13,
no. 3, August 2021
(pp. 406–46)
Abstract
Selective contracting is an increasingly popular tool for reducing health care costs, but any savings must be weighed against consumer surplus losses from restricted access. Recently, many prescription drug plans (PDPs) utilize preferred pharmacy networks to reduce drug prices. Our results suggest that Medicare Part D plans with preferred pharmacy networks pay lower retail drug prices, while subsidized enrollees' insensitivity to preferred pharmacy cost-sharing discounts reduces these savings. We then estimate pharmacy demand models to quantify the costs and benefits of preferred pharmacy networks, finding that the average enrollee benefits from preferred pharmacy contracting due to reduced out-of-pocket (OOP) costs at preferred pharmacies.Citation
Starc, Amanda, and Ashley Swanson. 2021. "Preferred Pharmacy Networks and Drug Costs." American Economic Journal: Economic Policy, 13 (3): 406–46. DOI: 10.1257/pol.20180489Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- H51 National Government Expenditures and Health
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
- L81 Retail and Wholesale Trade; e-Commerce
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