Eric Yde

Ph.D. Candidate in Economics

University of Virginia

Email: edy9g at virginia dot edu

I am a Ph.D. candidate in Economics at the University of Virginia. My research interests are in empirical industrial organization and the economics of healthcare markets. My current projects study how competition and regulations shape the prescription drug supply chain.

I received my B.A. in Economics from the University of Rochester. Prior to graduate school, I was a Senior Economist in the antitrust practice of Compass Lexecon.

Research

WORKING PAPERS

Vertical Integration and Regulated Profits in Pharmacy Benefits Markets

This paper studies the effects of vertical integration between insurers, pharmacy benefit managers (PBMs), and pharmacies on drug prices and insurance premiums. I construct an empirical model of pharmacy pricing, insurer premium setting, and consumer demand for insurance plans and pharmacies in Medicare Part D. The model is estimated using prescription drug claims data, which I combine with novel information on insurer-PBM relationships and pharmacy ownership. In equilibrium, vertically integrated insurers reduce premiums and increase internal prices for prescription fills, shifting profits to their pharmacies. This profit-shifting incentive is motivated by consumer cost-sharing, which allows firms to retain profits on integrated prescription fills, and is amplified by regulatory caps on insurer profits, which lead insurers to further inflate internal reimbursement rates in order to "tunnel" profits to their integrated pharmacies. I use the estimated model to simulate the divestiture of vertically integrated pharmacies from insurers and PBMs.

Draft available by request.

Program Chair Award, American Society of Health Economists; Snavely Prize for Best Dissertation Proposal, UVA.

Invited presentations: Southern Economic Association Annual Meeting (scheduled), American Society of Health Economists Annual Meeting (scheduled), Southeastern Health Economics Study Group, Congressional Budget Office.

The Effect of Price Caps on Pharmaceutical Advertising: Evidence from the 340b Program (with Sylvia Hristakeva and Julie Holland Mortimer)

Accepted at Management Science

We study the effect of price caps on the provision of costly effort by pharmaceutical firms using variation in drug discounts generated by a price regulation program that allows eligible hospitals to purchase outpatient drugs at steep discounts. These discounts directly affect drug manufacturers’ markups, and may change firms’ incentives to exert promotional effort targeted towards physicians at these hospitals. We find that the effects of price regulation on pharmaceutical firm effort depend crucially on the design of the regulations and the multi-product nature of pharmaceutical firms. Using detailed data on marketing payments from pharmaceutical firms to physicians, we observe that physicians receive 13% fewer promotional payments after their hospitals take up the program. The design of the price caps implies that discounts tend to increase with a drug’s age. Consistent with theoretical predictions, we find that pharmaceutical firms shift promotional payments away from older drugs and towards newer drugs, which are less affected by the price caps. For some drugs, this shift results in an increase in payments to physicians despite the price caps. Understanding these strategic, non-price adjustments is important for policymakers seeking to design effective regulations targeting specific products.

Invited presentations: American Society of Health Economists Annual Meeting.

Regulating Vertical Relationships in Prescription Drug Markets: Evidence from Medicaid

I study the price effects of requiring PBMs and insurers to replace their default fixed-price contracts with cost-plus contracts. Using difference-in differences methods, I find that Medicaid pre-rebate drug prices declined by an average of 17% in states that prohibited fixed-price contracting. The estimated price effects were driven by generic drugs, with slight increases in branded drug prices. These findings are consistent with cost-plus contracts reducing the ability of PBMs to profit off of asymmetric information regarding the true cost of drugs when negotiating compensation with insurers, but also inducing some PBM moral hazard by removing their profit incentives to contain costs. I also detect larger price decreases in states that rely more heavily on insurers that are not vertically integrated with a PBM. In markets where PBMs have strong informational advantages over non-integrated insurers, cost-plus contracts may be an effective means of reducing drug spending.

Invited presentations: ASSA Annual Meetings (Health Economics Research Organization Session).

Eric Yde

WORKING PAPERS

Vertical Integration and Regulated Profits in Pharmacy Benefits Markets

The Effect of Price Caps on Pharmaceutical Advertising: Evidence from the 340b Program (with Sylvia Hristakeva and Julie Holland Mortimer)

Regulating Vertical Relationships in Prescription Drug Markets: Evidence from Medicaid

WORKS IN PROGRESS

Strategic Procurement and Drug Diversion in the Wholesale Prescription Opioid Market (with Justin Garrison and Ashwin Nair)