Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120
Presentation
Bargaining Power and the Impact of Part D on Pharmacy Drug Prices
A controversial feature of the Medicare Part D drug benefit is reliance on private insurers to negotiate drug reimbursements and rebates with retail pharmacies and drug manufacturers. Critics believe that the federal government, acting as a single purchaser, would have greater bargaining power in these negotiations; supporters believe private insurers are able to leverage their entire book of business to bargain down costs. Using negotiated reimbursement rates from claims data obtained from a large national retail pharmacy, we test whether greater enrollment gives Part D insurers greater leverage to negotiate reimbursement rates with retail pharmacies. We then estimate the extent to which these cost-savings are passed on to enrollees, and how this varies with competitiveness in local PDP markets. Assuming that Medicare would act like a large, monopolistic firm, these results allow us to simulate hypothetical pharmacy reimbursements, coverage levels and intensity under a single government purchaser model.