Mergers in Medicare Part D: Assessing market power,cost efficiencies,and bargaining power |
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| Affiliation: | 1. Feinberg School of Medicine, Northwestern University, 420 E Superior St., Chicago, IL 60646, USA;2. Clemson University, USA;3. Temple University, USA;1. Centre for Competition Policy, University of East Anglia, Norwich NR4 7TJ, UK;2. School of Economics, University of East Anglia, Norwich NR4 7TJ, UK;3. Norwich Business School, University of East Anglia, Norwich NR4 7TJ, UK;4. Comtech Systems Inc., Victoria, BC, Canada;1. PUC-Chile;2. Tel-Aviv University;3. KU Leuven;1. Department of Economics, Finance and Legal Studies, The University of Alabama, 200 Alston Hall, Tuscaloosa, AL, 35487, USA;2. Econonomic Science Institute, Chapman Univeristy, One University Dr., Orange, CA 92866, USA;3. Department of Economics, Clemson University, 228 Sirrine Hall, Clemson, SC 29634, USA |
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| Abstract: | We empirically examine horizontal mergers amongst Part D insurers with the aim of assessing how market power, cost efficiencies, and bargaining power affect premiums and coverage characteristics, including drug access and out-of-pocket (OOP) cost. Our results reveal that market power raises premiums, but this is only a local effect that occurs in markets where the merging firms overlap. Mergers alter the bargaining process with upstream suppliers at both local and national levels, affecting drug access and OOP cost. We find evidence of cost efficiencies when firms restructure by consolidating their plan offerings. |
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