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Mergers in Medicare Part D: Assessing market power, cost efficiencies, and bargaining power

Anna Chorniy, Daniel Miller and Tilan Tang

International Journal of Industrial Organization, 2020, vol. 68, issue C

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.

Date: 2020
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DOI: 10.1016/j.ijindorg.2019.102548

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International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

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Handle: RePEc:eee:indorg:v:68:y:2020:i:c:s0167718719300761