The Role of Government Reimbursement in Drug Shortages

Ali Yurukoglu, Eli Liebman and David Ridley

No 17987, NBER Working Papers from National Bureau of Economic Research, Inc

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 (i) higher shares of patients insured by Medicare, (ii) greater decreases in provider reimbursement, and (iii) greater decreases in manufacturer prices.

JEL-codes: I11 I18 L51 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (6)

Published as Ali Yurukoglu & Eli Liebman & David B. Ridley, 2017. "The Role of Government Reimbursement in Drug Shortages," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 348-382, May.

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