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

Distributive inefficiency in horizontal mergers: Evidence from wealth transfers between merging firms and their customers

“…7 Our results also complement previous evidence of market power from clinical and industry studies (e.g., Barton and Sherman, 1984;Borenstein, 1990;Kim and Singal, 1993;Singal, 1996;Prager and Hannan, 1998;Focarelli and Panetta, 2003;Devos et al, 2016;Chorniy et al, 2018).…”

An Empirical Model of Bargaining with Equilibrium of Fear: Application to Retail Mergers in the French Soft Drink Industry

“…Among others, it has been shown that countervailing buyer power may arise when marginal production costs are convex (Chipty and Snyder, 1999;Inderst and Wey, 2003) or when the merging retailers adopt a singlesourcing policy forcing manufacturers to compete for exclusivity (Inderst and Shaffer, 2007;Dana, 2012). 9 Along the structural approach, reduced-form analysis have also been used to study the impact of downstream concentration on market outcomes (see, e.g., Chorniy, Miller and Tang, 2020;Craig, Grennan and Swanson, 2021). These articles document mixed evidence on countervailing buyer power effects.…”

Does Consolidation in Insurer Markets affect Insurance Enrollment and Drug Expenditures? Evidence from Medicare Part D

“…On the other hand, consolidation in insurer markets can lead to higher premiums because of market power (see Dafny et al 2012 andTrish andHerring 2015 for evidence on commercial insurance; Dafny et al 2015 for evidence on ACA Marketplace plans). Prior empirical research shows mixed effects of insurer market consolidation on premiums (see evidence in Scheffler et al 2016 for ACA Marketplace plans; Ho and Lee 2017 for commercial insurance; Chorniy et al 2020 andHill andWagner 2021 for Medicare Part D). We know much less, however, about the effects of insurer market consolidation on outcomes measured at the individual level -such as insurance enrollment decisions and individual drug expenditures -which are closely related to consumers' wellbeing.…”

“…They find that premiums increase by 7 percent, and the insurer reduces payments to physicians by 3 percent. In a closer relationship to our work, Chorniy et al (2020) examine 10 mergers in the Medicare Part D market from 2006 to 2012. They find premium increases when the merging insurers serve in the same Medicare region.…”