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The Impact of Pharmacy-Specific Any-Willing-Provider Legislation on Prescription Drug Expenditures

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  • Christine Durrance

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Abstract

Many states have implemented some form of Any-Willing-Provider (AWP) legislation, which requires a managed care organization (MCO) to accept any provider, who agrees to the managed care organization’s reimbursement rates, terms, and conditions, into its network. AWP laws may result in larger networks, more patient choice, and greater competition among providers. Opponents cite AWP legislation as prohibiting managed care organizations from selective contracting and obtaining discounts by offering providers a larger volume of patients. Such legislation is therefore argued to prevent MCOs from effectively reducing health care costs. A small literature exists on the effect of these laws on hospital expenditures, physician expenditures, and total health care expenditures. Most studies, however, fail to recognize that the vast majority of the existing laws target pharmacies exclusively, as opposed to more comprehensive laws that also apply to physicians and hospitals. If AWP legislation prevents cost reduction available through selective contracting, then states with such legislation may incur higher health care expenditures. I find that pharmacy-specific AWP legislation is associated with increased pharmaceutical expenditures. This result is robust to several alternative specifications. Copyright International Atlantic Economic Society 2009

Suggested Citation

  • Christine Durrance, 2009. "The Impact of Pharmacy-Specific Any-Willing-Provider Legislation on Prescription Drug Expenditures," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(4), pages 409-423, December.
  • Handle: RePEc:kap:atlecj:v:37:y:2009:i:4:p:409-423
    DOI: 10.1007/s11293-009-9190-x
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    References listed on IDEAS

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    1. David M. Cutler & Louise Sheiner, 1998. "Managed Care and the Growth of Medical Expenditures," NBER Chapters,in: Frontiers in Health Policy Research, Volume 1, pages 77-116 National Bureau of Economic Research, Inc.
    2. Vita, Michael G., 2001. "Regulatory restrictions on selective contracting: an empirical analysis of "any-willing-provider" regulations," Journal of Health Economics, Elsevier, vol. 20(6), pages 955-966, November.
    3. Cutler David M. & Sheiner Louise, 1998. "Managed Care and the Growth of Medical Expenditures," Forum for Health Economics & Policy, De Gruyter, vol. 1(1), pages 1-41, January.
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    Cited by:

    1. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.

    More about this item

    Keywords

    Managed care; Any-willing-provider; Selective contracting; Pharmacy; Prescription drugs; Health care expenditures; Health maintenance organization; I10; I18;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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