Restrict the Middleman? Quantitative Models of PBM Regulations and Their Consequences

Casey Mulligan

No 30998, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides the first quantitative economic models of pharmacy benefit management regulation. The price-theoretic models allow for various market frictions and imperfections including market power, coordination costs, tax distortions, and incomplete innovation incentives. A rigorous economic interpretation is provided for what are sometimes called “rebate walls” or “rebate traps.” Applicable types of regulation include rebate rules, such as the HHS rebate rule and the Insulin Act; disclosure requirements such as the PBM Transparency Act of 2023; and pharmacy contract restrictions such as the CMS Medicare rule to take effect in 2024. Utilization of brands and generics, plan spending, cost sharing, spillovers to nonpharmacy medical spending, government budgets, and the pace of drug innovation are among the outcomes tracked by the open-source model.

JEL-codes: D43 D71 I11 I13 L14 L51 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-com and nep-reg
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