Department of Healthcare Efficiency
The Long-Run Impacts of Regulated Price Cuts: Evidence from Medicare
Yunan Ji & Parker Rogers
NBER Working Paper, October 2024
Abstract:
We investigate the effects of substantial Medicare price reductions in the medical device industry, which amounted to a 61% decrease over 10 years for certain device types. Analyzing over 20 years of administrative and proprietary data, we find these price cuts led to a 25% decline in new product introductions and a 75% decrease in patent filings, indicating significant reductions in innovation activity. Manufacturers decreased market entry and increased outsourcing to foreign producers, associated with higher rates of product defects. Our calculations suggest the value of lost innovation may fully offset the direct cost savings from the price cuts. We propose that better-targeted pricing reforms could mitigate these negative effects. These findings underscore the need to balance cost containment with incentives for innovation and quality in policy design.
Postapproval Innovation for Oncology Drugs and the Inflation Reduction Act
Henry Grabowski, Joseph DiMasi & Genia Long
Health Affairs, October 2024, Pages 1400-1409
Abstract:
The Inflation Reduction Act’s Drug Price Negotiation Program (DPNP) will affect incentives for biopharmaceutical investment by reducing prices and expected profits. Discussion has focused on the program’s potential impact on the number of new drugs, but postapproval activity, which is common in oncology, will also be affected. If the history we describe is representative, postapproval exposure to DPNP eligibility dates would be high for oncology drugs. For 155 oncology drugs approved during the period 2000–21 (112 small molecules and 43 biologics), 57 percent of labeled indications approved by the Food and Drug Administration and 68 percent of industry-sponsored clinical trials occurred postapproval, often near or after DPNP selection dates. Compared with biologics, exposure to DPNP eligibility dates is more than twice as high for small molecules; although expected durations from drug approval to trial end are shorter, DPNP eligibility dates occur much sooner. Areas of potential postapproval impact include additional tumor types; rare diseases, particularly for drugs with multiple orphan indications; and pediatric indications, of which two-thirds occurred postapproval.
Unlocking the Revolving Door: How FDA-Firm Relationships Affect Drug Approval Rates and Innovation in the Pharmaceutical Industry
Sepehr Roudini
University of Iowa Working Paper, December 2023
Abstract:
FDA reviewers and directors are often hired by the firms they enforce. In this study, I investigate how this revolving door phenomenon benefits the hiring firm ex-post. I find that when pharmaceutical companies hire former FDA employees, the rate of drug approvals increases which in turn raises firm value. When the former revolving door employee held higher-ranked executive position, the effect is more pronounced. Robustness tests within a subset of larger firms, and controlling for variables that could drive firm drug approval -- R&D, capital expenditures, leverage and ROA -- do not change my results. I find no evidence that the drug quality of firms hiring former FDA employees is negatively affected, as evidenced by lack of FDA recalls. This suggests that the revolving door effect operates through the channels of knowledge and efficiency, rather than relying on personal favors or compromised drug safety. Consistent with this hypothesis, I find evidence of an uptick in innovation output for firms employing former FDA personnel.
Resumption of Medicaid Eligibility Redeterminations: Little Change in Overall Insurance Coverage
Sumedha Gupta et al.
Health Affairs, November 2024, Pages 1518-1527
Abstract:
In anticipation of the end of the COVID-19 public health emergency, Congress ended the Medicaid continuous coverage requirement on March 31, 2023, allowing states to terminate coverage for ineligible people and resume eligibility determinations through a process known as unwinding. Although administrative data have documented substantial declines in Medicaid enrollment since April 2023, the impact on uninsurance is unknown. Using data from the Census Bureau’s Household Pulse Survey, we estimated the early effect of Medicaid unwinding on insurance coverage among people ages 19–64. We found that within the first three months of unwinding, the number of people self-reporting Medicaid coverage declined by approximately two million, and there was a much smaller, statistically insignificant decline in overall coverage of approximately 467,000 people. It appears that for many people, the availability of employer-sponsored insurance and other private coverage offset Medicaid coverage loss. These results suggest that the resumption of redeterminations has had less impact on uninsurance than was initially feared. Our findings highlight the importance of tracking coverage transitions during unwinding. By identifying populations at risk for uninsurance after Medicaid loss, these data could enhance the effectiveness of state outreach and enrollment assistance for people eligible for Marketplace coverage and subsidies.
Small-Molecule Drugs Offer Comparable Health Benefits to Biologics at Lower Costs
Katherine Clifford et al.
Health Affairs, November 2024, Pages 1546-1552
Abstract:
The Inflation Reduction Act of 2022 requires that Medicare negotiate a Maximum Fair Price for selected small-molecule drugs nine years after their Food and Drug Administration (FDA) approval and thirteen years postapproval for selected biologics. The discrepancy between these time frames raises questions about the relative value of small-molecule drugs versus biologics. We compared the incremental quality-adjusted life-year (QALY) gains, incremental costs, and incremental cost-effectiveness ratios (ICERs) of small-molecule drugs and biologics approved by the FDA during the period 1999–2018. We used the Mann-Whitney U test (to compare medians) and Kolmogorov-Smirnov test (to compare the distributions). We found that small-molecule drugs and biologics offer similar magnitudes of incremental QALY gains (0.08 versus 0.10). Small-molecule drugs tend to be associated with lower additional costs ($4,738 versus $16,020) and more favorable cost-effectiveness ($108,314 per QALY versus $228,286 per QALY). Creating parity regarding time to Medicare price negotiation may be appropriate.
US Nonprofit Hospitals Have Widely Varying Criteria to Decide Who Qualifies for Free and Discounted Charity Care
Luke Messac et al.
Health Affairs, November 2024, Pages 1569-1577
Abstract:
US nonprofit hospitals are required by law to have a charity care policy, but hospitals have significant discretion in determining specific eligibility criteria. Using a novel national database, this analysis revealed that nonprofit hospitals have chosen widely varying charity care eligibility guidelines. Among hospitals that offered free care, income limits ranged from 41 percent to 600 percent of the federal poverty guideline. Many hospitals considered assets when determining eligibility for charity care, and a significant minority also had residency requirements and restrictions for insured patients. Hospitals generally allowed charity care in cases of hardship, with a median cutoff of a given hospital bill being 20 percent of the patient’s income. Hospitals in counties with lower levels of poverty and uninsurance had more generous eligibility policies. The wide variation in requirements for hospital financial assistance poses barriers to equitable access to care.
Physician Practice Preferences and Healthcare Expenditures: Evidence from Commercial Payers
Jeffrey Clemens et al.
NBER Working Paper, October 2024
Abstract:
We examine the relationship between physician preferences and both the intensity and cost of care delivered to commercially insured heart attack patients. We match survey data on physician preferences, collected by Cutler, Skinner, Stern, and Wennberg (2019) (CSSW), to medical claims data from the Health Care Cost Institute, which spans over 50 million insurance beneficiaries. In contrast to CSSW, who find strong correlations between aggressive practice preferences and both expenditure and utilization for the Medicare population, we find relationships that are both economically and statistically smaller in magnitude within the commercially insured population. Variations in commercial insurers’ prices appear to play an important mediating role.
Electronic Health Record Documentation Burden Crowds Out Health Information Exchange Use by Primary Care Physicians
Jay Holmgren, Julia Adler-Milstein & Nate Apathy
Health Affairs, November 2024, Pages 1538-1545
Abstract:
Although electronic health record (EHR) documentation burden is known to be associated with reduced clinician well-being and burnout, it may have even worse unintended consequences if documentation work also crowds out other high-value EHR tasks. We examined this possibility by assessing the relationship between documentation burden and a high-value but optional EHR task: the use of health information exchange (HIE) to view patient records from outside organizations. Our study took advantage of an exogenous shock to documentation time: appointment no-shows. We found that documentation time had a strong impact on HIE use, with each additional hour spent documenting resulting in a 7.1 percent reduction in the proportion of patients with an outside record viewed by the primary care physician seeing them that day. Our results point to the urgent need for policy makers to do more to reduce documentation burden.
The Effects of Access to Medicaid on the Employment and Academic Progress of College Students
Priyanka Anand & Dora Gicheva
American Journal of Health Economics, Fall 2024, Pages 603–634
Abstract:
This paper examines whether expanding Medicaid eligibility affects the employment patterns and academic progress of college students. To estimate causal relationships, we use variation in eligibility due to the Affordable Care Act Medicaid expansions that occurred in a subset of US states. Using data from the National Postsecondary Student Aid Study, we show that expanding Medicaid resulted in a decrease in employment intensity that is most pronounced for students at community colleges. We also see evidence of students making better progress towards graduation, suggesting that expanding Medicaid may have benefited some students by allowing them to shift their focus from work to school. These findings provide insight into how access to publicly provided health insurance can reduce inequalities in long-term education and socioeconomic outcomes.
Expected Out-Of-Pocket Costs: Comparing Medicare Advantage with Fee-For-Service Medicare
Benedic Ippolito, Erin Trish & Boris Vabson
Health Affairs, November 2024, Pages 1502-1507
Abstract:
We compared the generosity of Medicare plans in terms of out-of-pocket costs attributable to cost sharing and premiums, including both basic and supplemental services. From 2014 through 2019, projected out-of-pocket costs for a typical enrollee were 18–24 percent lower in Medicare Advantage than traditional fee-for-service Medicare.
The causal effect of repealing Certificate-of-Need laws for ambulatory surgical centers: Does access to medical services increase?
Thomas Stratmann, Markus Bjoerkheim & Christopher Koopman
Southern Economic Journal, forthcoming
Abstract:
In many states, Certificate-of-Need (CON) laws prevent ambulatory surgical centers (ASCs) from entering the market or expanding their services. This paper estimates the causal effects of state ASC-CON law repeal on the accessibility of medical services statewide, as well as for rural areas. Our findings show that CON law repeals increase ASCs per capita by 44%–47% statewide and 92%–112% in rural areas. Repealing ASC-CON laws causes a continuous increase in ASCs per capita, an effect which levels off 10 years after repeal. Contrary to the “cream-skimming” hypothesis, we find no evidence that CON repeal is associated with hospital closures in rural areas. Rather, some regression models show that repeal is associated with fewer medical service reductions.