The role of government reimbursement in drug shortages
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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 higher shares of patients insured by Medicare, greater decreases in provider reimbursement, and greater decreases in manufacturer prices.
Published Version (Please cite this version)10.1257/pol.20160035
Publication InfoYurukoglu, A; Liebman, E; & Ridley, David Blaine (2017). The role of government reimbursement in drug shortages. American Economic Journal: Economic Policy, 9(2). pp. 348-382. 10.1257/pol.20160035. Retrieved from http://hdl.handle.net/10161/15916.
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Professor of the Practice of Business Adminstration
David Ridley is the Dr. and Mrs. Frank A. Riddick Professor of the Practice of Business Administration. He is also the Faculty Director of Duke's Health Sector Management program. In his research, David examines innovation and pricing, especially in health care. He was the lead author of the paper proposing the priority review voucher program to encourage development of drugs for neglected diseases.