| Chapter One examines Medicaid preferred drug lists (PDLs), a cost-containment tool that designates specific drugs for use by Medicaid beneficiaries. I 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 markets in Illinois and Louisiana. I find a significant decrease in post-PDL Medicaid prescription shares of drugs excluded from the PDL. Spillovers onto the third party and cash market are also statistically significant. Moreover, a more restrictive prior authorization procedure has a greater impact on prescription shares. There is evidence of a gradual adjustment in prescription shares. Last, the impact of PDLs is stronger among physicians with a higher share of Medicaid prescriptions.; Part I of Chapter Two focuses on generic competition following the enactment of the 1984 Waxman-Hatch Act. Unlike existing literature, I employ antibiotics as a control group to infer legislation-induced increases in generic competition. Using FDA drug approval data, I find evidence that the Act enhanced generic competition. Moreover, the overall impact of the Act is greater for newer drugs than older drugs. In Part II, I explore the factors affecting voluntary drug exit in a framework of a duration model. Using FDA drug approval and withdrawal data and the National Drug Code Directory, I find evidence that drug exit is exacerbated by generic competition, while the impact competition between other branded drugs within its therapeutic class, namely "between-patent competition", is not statistically significant.; In Chapter Three, we test the pharmaceutical-embodied technical progress hypothesis-that newer drugs increase the length and quality of life-and estimate the rate of progress. We estimate health production functions using prescription-level, cross-sectional data derived primarily from the 1997 Medical Expenditure Panel Survey. We find that people who used newer drugs had better post-treatment health than people using older drugs for the same condition, controlling for pre-treatment health, age, sex, etc. The estimated cost of an increase in drug vintage required to keep a person alive is lower than some estimates of the value of remaining alive for one month. |
