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

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  • Chorniy, Anna
  • Miller, Daniel
  • Tang, Tilan

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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  • Chorniy, Anna & Miller, Daniel & Tang, Tilan, 2020. "Mergers in Medicare Part D: Assessing market power, cost efficiencies, and bargaining power," International Journal of Industrial Organization, Elsevier, vol. 68(C).
  • Handle: RePEc:eee:indorg:v:68:y:2020:i:c:s0167718719300761
    DOI: 10.1016/j.ijindorg.2019.102548
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