“Insurance Design and the Passthrough of Nominal Drug Prices”(with Josh Feng)

When plans must provide a minimum level of coverage, sponsors have an incentive to use list prices and rebates to circumvent coverage restrictions and increase patient cost-sharing. Using exposure to the Medicaid market as an instrument, we confirm that higher list prices lead to higher patient out-of-pocket costs. Passthrough is lowest in PPO and HMO commercial plans and highest in HDHPs and Medicare Part D plans.

“Stocking Under the Influence: Spillovers from Commercial Drug Coverage to Medicare Utilization”(with Emma B. Dean and Josh Feng) Revisions requested at American Economic Review

We argue that drug coverage in commercial insurance can affect utilization in Medicare Part B. Leveraging state-level variation in the adoption of national formularies as an IV, we show that higher exclusion rates in commercial formularies are causally linked to lower Part B utilization. Prescribing patterns of physicians operating across multiple facilities show that the effect is not driven by physician preferences but by facility stocking behavior.

Feng, Josh, Thomas Hwang, Jacob Klimek, and Luca Maini. “Biosimilar Entry and the Pricing of Biologic Drugs”accepted, Review of Industrial Organization.

We show that originator biologics respond to biosimilar entry by reducing net-of-rebate prices to maintain volume, in contrast to the well-documented response of small-molecule drugs to generic entry, and provide suggestive evidence that perceived differences drive the strategic response.

Feng, Josh, Thomas Hwang, Yunjuan Liu, and Luca Maini. “Mergers that Matter: The Impact of M&A Activity in Prescription Drug Markets” accepted, Journal of Political Economy Microeconomics.

We build a novel dataset tracking acquisitions of branded drugs. Horizontal acquisitions that escape regulatory scrutiny are followed by large price increases. Cross-market acquisitions that do not involve directly competing drugs do not have a detectable effect on prices.

Media coverage: Chicago Booth Review
Associated documents: public comment on proposed changes to the premerger notification program

Layton, Tim, Luca Maini, and J. Michael McWilliams. “Substitutes for Success? Public versus Private Competition in Medicare Advantage.” Journal of Economic Perspectives 40, no. 2 (2026): 143-170
Competition between traditional Medicare (TM) and private insurers within Medicare Advantage (MA) acts as a substitute in incentivizing plans to deliver value. While historically, the choice between TM and MA provided a vital competitive dynamic, TM's strength as a competitor has declined significantly, shifting the burden of ensuring value for enrollees to competition within MA.

Feng, Josh, and Luca Maini. “Demand Inertia and the Hidden Impact of Pharmacy Benefit Managers” Management Science 70, no. 12 (2024): 8940-8961.
Slides

We estimate a dynamic structural model of drug pricing using net-of-rebate prices of anti-cholesterol drugs from 1996-2013 and use it to argue that inertia in drug demand obscures the impact of PBMs on prices and spending.

Feng, Josh, Thomas Hwang, and Luca Maini. “Profiting from Most-Favored Customer Procurement Rules: Evidence from Medicaid” American Economic Journal: Economic Policy 2023, 15(2): 166–197)
Online Appendix, Slides

We find that an increase to Medicaid’s minimum drug rebate under the Affordable Care Act in 2010 lowered non-Medicaid drug spending by 2.5 percent. The result is likely driven by the interaction of this reform with Medicaid’s “most-favored customer” clause (MFCC).

Maini, Luca, and Fabio Pammolli. “Reference Pricing as a Deterrent to Entry: Evidence from the European Pharmaceutical Market” American Economic Journal: Microeconomics, 2023, 15(2): 345–383
Online Appendix, Slides

We estimate a structural model to show that drug manufacturers delay the launch of novel drugs in low-income European countries by up to one year in response to incentives generated by External Reference Pricing policies

Media coverage: StatNews, RealClearPolicy, The Economist