Department of Economics

A Tale of Loopholes and Greed: The Effect of the Affordable Care Act on Drug Prices

Research completed by Sarah Svendsen

Abstract of research: This study uses panel data from 2006 to 2014 and a fixed effects model to determine if the Patient Protection and Affordable Care Act amplified or slowed price increases in response to an ingress of newly insured patients. The market structure and its interaction with different insurance types are presented along with analysis of those payment types before and after the Affordable Care Act went into effect. Three different drug types are also isolated and examined. Results show that Medicaid disproportionately shoulders the burden of higher costs across all medication types. Additionally, brand name medications are shown to have the largest increase in prices for all payment types. Interestingly, price growth did not change for consumer share of cost (out-of-pocket payments) for most drug and payment types.