Prescription drug spending in the US is high and increasing. In her lecture, Kate Ho and her co-author Robin Lee develop a model to assess whether the structure of the formulary developed by intermediaries such as pharmacy benefit managers (PBMs) on behalf of plan sponsors can meaningfully constrain drug manufacturer spending. The model is applied to the empirical setting provided by the market for statins in the large group commercial market. A model like this is needed to address policy-relevant questions concerning the benefits provided by intermediaries like PBMs, and competition between branded pharmaceutical drugs more broadly.
Contracting over Rebates: Formulary Design and Pharmaceutical Spending