Working Paper: NBER ID: w17987
Authors: Ali Yurukoglu; Eli Liebman; David B. Ridley
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.
Keywords: Medicare; Drug Shortages; Reimbursement
JEL Codes: I11; I18; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower Medicare reimbursements to providers (I18) | higher shortages of drugs (L65) |
| lower reimbursements to providers (I18) | lower prices to manufacturers (L11) |
| lower prices to manufacturers (L11) | higher shortages of drugs (L65) |