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

Josh Feng, Thomas Hwang and Luca Maini

American Economic Journal: Economic Policy, 2023, vol. 15, issue 2, 166-97

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-codes: C78 H51 I18 I38 L65 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1257/pol.20200688

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