The Law and Economics of Any Willing Provider Laws

Josh Wright —  31 March 2012

While I’m posting about health care regulation, I’d like to point TOTM readers to a short article with Jonathan Klick (University of Pennsylvania) summarizing the economics and empirical evidence surrounding “Any Willing Provider”(AWP) laws for the Washington Legal Foundation.   We write:

This analysis evaluates the antitrust law ramifications of proposals requiring pharmacy benefit managers (“PBMs”) to open up their networks to “any willing provider” meeting the same terms and  conditions as other network members. Providers which have failed to meet a PBM’s terms have frequently sought the enactment of any-willing-provider (“AWP”) legislation (or comparable administrative action). A recent federal proposal, The Pharmacy Competition and Consumer Choice Act of 2011 (“the Act”)1 — provides a useful model for this analysis. Both economic analysis and available empirical evidence suggest  the bill will harm consumers by restricting competition.

In the paper, we describe the anticompetitive effects of AWP legislation and the benefits of selective contracting which are undermined by such laws.  On the existing empirical evidence, we conclude:

The empirical research on the topic consistently indicates that AWP laws increase per capita  healthcare spending generally and pharmaceutical expenditures in particular directly. The related literature  on the effect of these laws on HMO penetration also suggests these laws may increase spending indirectly given that the laws lead to lower penetration and HMOs control costs better than indemnity insurance plans.  These results are consistent with economic theory regarding selective contracting.

The article is available here.