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The Effect of Any Willing Provider and Freedom of Choice Laws on Prescription Drug Expenditures

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  • Jonathan Klick
  • Joshua D. Wright

Abstract

Pharmacy benefit managers (PBMs) potentially lower costs associated with prescription drugs through increased bargaining power with manufacturers. PBMs engage in selective contracting with pharmacies which has the potential to reduce retail competition, leading to increased prices. Proponents of "Any Willing Provider (AWP)" and "Freedom of Choice (FOC)" laws limiting this selective contracting claim increased retail competition will lower prescription drug spending. Examining the passage of such laws over the period 1991–2009, we find that AWP laws increase spending on prescription drugs by ~5% beyond any pre-existing trends in spending while FOC laws have no significant effect.

Suggested Citation

  • Jonathan Klick & Joshua D. Wright, 2015. "The Effect of Any Willing Provider and Freedom of Choice Laws on Prescription Drug Expenditures," American Law and Economics Review, American Law and Economics Association, vol. 17(1), pages 192-213.
    • Handle: RePEc:oup:amlawe:v:17:y:2015:i:1:p:192-213.
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    File URL: http://hdl.handle.net/10.1093/aler/ahu013
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    Cited by:

    1. Fossett, Sarah J. & Wunnava, Phanindra V., 2017. "Active Ingredients: Exploring the Key Factors Affecting the Rising Cost of Developing New Drugs," IZA Discussion Papers 10817, Institute of Labor Economics (IZA).
    2. Daniel Hosken & David Schmidt & Matthew C. Weinberg, 2020. "Any Willing Provider and Negotiated Retail Pharmaceutical Prices," Journal of Industrial Economics, Wiley Blackwell, vol. 68(1), pages 1-39, March.

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