Procuring Medical Devices: The Price Effect of Mergers Among Orthopedic Prostheses Producers

This paper quantifies the price effects of a merger between two major producers of orthopedic prostheses. It shows that, in the public procurement markets where these products are purchased, the effect of the merger hinges on the characteristics of both the procurement design and the organizational structure of the buyers. Using data from all public procurement events in Italy between 2012 and 2019, and exploiting a difference-in-differences model where pacemakers play the role of the control group, we find that the merger led to a 7.6% increase in prices and that this effect is concentrated in the first three years post-merger. Further insights are: (i) a heterogeneous impact among gender and age groups such that most of the burden is on female patients aged 65 and above; (ii) short term quality does not change, but patenting activity declines; (iii) there is no evidence of the merger triggering ex post coordinated effects in the form of bidding and entry patterns compatible with firm collusion.