The Role of Government Reimbursement in Drug Shortages
American Economic Journal: Economic Policy
vol. 9,
no. 2, May 2017
(pp. 348-82)
Abstract
Beginning in the mid-2000s, the incidence of drug shortages rose, especially for generic injectable drugs such as anesthetics and chemotherapy treatments. We examine whether reimbursement changes contributed to the shortages, focusing on a reduction in Medicare Part B reimbursement to providers for drugs. We hypothesize that lower reimbursement put downward pressure on manufacturers' prices, which reduced manufacturers' incentives to invest in capacity, reliability, and new launches. We show that after the policy change, shortages rose more for drugs with higher shares of patients insured by Medicare, greater decreases in provider reimbursement, and greater decreases in manufacturer prices.Citation
Yurukoglu, Ali, Eli Liebman, and David B. Ridley. 2017. "The Role of Government Reimbursement in Drug Shortages." American Economic Journal: Economic Policy, 9 (2): 348-82. DOI: 10.1257/pol.20160035Additional Materials
JEL Classification
- H51 National Government Expenditures and Health
- I18 Health: Government Policy; Regulation; Public Health
- L10 Market Structure, Firm Strategy, and Market Performance: General
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
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