Antitrust Issues in Pharmaceutical Markets
Friday, Jan. 7, 2022 3:45 PM - 5:45 PM (EST)
- Chair: Kate Bundorf, Duke University
The Effects of Drug Coupons on Branded Pharmaceuticals
AbstractIn recent years, drug copayment coupons to reduce consumer cost-sharing at the point of purchase have become nearly ubiquitous for high-priced brand-name prescription drugs. Medicare bans such coupons on the grounds they are kickbacks for utilization; however, their use is common among the commercially insured. We estimate the causal effects of coupons on demand using variation in coupon introductions over time and by comparing enrollees in commercial vs Medicare Advantage plans. Using data on net-of-rebate prices and quantities from a large pharmacy benefits manager, we show that coupon introductions increase demand by 15% for the commercial segment relative to Medicare Advantage but do not differentially impact net-of-rebate prices.
Common Agent or Double Agent? Pharmacy Benefit Managers in the Prescription Drug Market
AbstractIn the U.S., pharmacy benefit managers (PBMs) manage prescription drug purchases for payers. Firms selling branded pharmaceuticals bid for preferred slots on the PBM’s formulary by offering rebates off of list price. We find that PBMs enhance efficiency, but the gains do not accrue to consumers or drug makers. Our analysis offers insights into otherwise puzzling questions. Why do drug makers pay rebates to PBMs? Why do payers delegate formulary operations to a few large PBMs? Why are list prices so high? Why might PBMs vertically integrate with payers? Our framework also offers insights into proposals for market reform.
Consolidation in Prescription Drug Markets: Impact on Pricing and Access
AbstractDespite widespread interest in both mergers and drug markets, very few studies have attempted to study consolidation in this setting, partly because of the lack of reliable data on effective net prices, and because keeping track of the company that owns the marketing rights to a specific drug is complicated. In this paper, we address these issues by constructing a novel dataset of pharmaceutical M&A activity, which we combine with a panel of net sales and formulary status for a set of approximately 1,000 patent-protected drugs between 2007 and 2020. We use a simple event-study design with heterogeneous treatment timing to estimate the reduced-form impact of an acquisition. Our results suggest that drugs involved in acquisitions experience a significant increase in both list and net price, and a decline in units sold. We also find a heterogeneous effect on formulary status. Acquisitions that involve drugs in the same therapeutic class result in worse formulary coverage, while the opposite is true for acquisitions that do not involve such drugs.
- I1 - Health