David Dranove and Cory S. Capps
After a brief discussion of the evolution of competition in healthcare markets, we review key economic concepts and empirical research, addressing in turn the three largest sectors of the healthcare industry: hospitals, physicians, and insurers. For each sector, we present illustrative, often seminal, antitrust cases, while emphasizing the interaction between economic research and litigation outcomes in antitrust cases. With respect to providers, we address issues that arise in horizontal mergers and then turn attention to common categories of vertical theories of harm, largely pertaining to exclusionary conduct. With respect to payers, we separately examine competition in output markets (the sale of commercial health insurance) and input markets (the purchase of provider services) and show how the two are intertwined. We conclude with a discussion of the role of competition policy in the midst of rapidly evolving public and private healthcare reform initiatives.
Henry G. Grabowski and Margaret Kyle
This article considers the determinants and effects of M&As in the pharmaceutical industry, with a particular focus on innovation and R&D productivity. As is the case in other industries, mergers in the pharmaceutical field are driven by a variety of company motives and conditions. These include defensive responses to industry shocks as well as more proactive rationales, such as economies of scale and scope, access to new technologies, and expansion to new markets. It is important to take account of firms' characteristics and motivations in evaluating merger performance, rather than using a broad aggregate brushstroke. Research to date on pharmaceuticals suggests considerable variation in both motivation and outcomes. From an antitrust policy standpoint, the larger horizontal mergers in pharmaceuticals have run into few challenges from regulatory authorities in the United States and the European Union, given the option to spin off competing therapeutic products to other drug firms.