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

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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.

Document Type: Research Article


Affiliations: 1: Pfizer Pte Ltd., #29-00 Gateway East, Singapore 189721 2: KDI School of Public Policy and Management, 207-43 Cheongnyangri 2-Dong, Seoul 130-868, Korea

Publication date: September 1, 2009

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