OBJECTIVES The objective of our study was to estimate the impact of Medicare part D on the labeled indication size (market size) in oral oncology drugs.

METHODS We used the quasi-experimental study design by exploiting the exogenous variation in the age at the cancer diagnosis for various cancer sites. This variation in age at diagnosis for different cancer sites helped us isolate the impact of Medicare part D from other contemporary developments such as genomics advances. We utilized the fixed effects Poisson regression to estimate the impact of Medicare part D on our count outcome of indication size in oral oncology drugs and used injectable cancer drugs as a control group. We controlled for several time-varying covariates and included the cancer site and time fixed effects. We used a difference-in-difference approach to estimate the effect of Medicate part D on the indication size.

RESULTS We identified 261 unique drug-indication pairs, and after excluding the drug-indication pairs based on exclusion criteria we used 237 drug-indication pairs for our final analyses. The indication size for oral oncology drugs decreased by 37.5% in the post-MMA period. For a one percent increase in the proportion of Medicare-eligible patients for a cancer site, the indication size for oral cancer drugs decreased by 3.28% (p-value=0.001). In our analysis, the companion diagnostics or the line of therapy did not contribute significantly to the indirect effect of Medicare part D on the potential indication size.

CONCLUSIONS The labeled indication size for oral cancer drugs decreased in the post-MMA period, and the effect was heterogeneous based on the proportion of Medicare-eligible patients for cancer sites at the time of diagnosis. These findings indicate that insurance coverage expansions can incentivize pharmaceutical firms to innovate in smaller markets provided that the drugs being developed for such markets are provided with guaranteed coverage.