Contents

The impact of Medicaid's preferred drug lists on physicians' prescribing behaviour

Virabhak, Suchin / Sohn, Wook

Abstract

This article examines Medicaid preferred drug lists (PDLs), a cost-containment tool that designates specific drugs for use by Medicaid beneficiaries. We develop an empirical model to measure the direct and spillover effects of Medicaid PDL across Medicaid, cash and third-party payer markets; and apply product level panel data to the cardiovascular market in Illinois and Louisiana. We find a significant decrease in post-PDL Medicaid prescription shares of drugs excluded from the PDL. Spillovers onto third parties and the cash market are also statistically significant. Moreover, a more restrictive prior authorization procedure has a greater impact on prescription shares. There is evidence of gradual adjustment in prescription shares. Lastly, the impact of PDLs is stronger among physicians with a higher share of Medicaid prescriptions.

Issue Date
2009-09
Publisher
Routledge
Keywords Plus
FORMULARY; BENEFITS
DOI
10.1080/00036840701320209
Journal Title
Applied Economics
Start Page
2705
End Page
2725
ISSN
0003-6846
Language
English
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