Vertical Integration and Consumer Welfare in Pharmaceutical Distribution

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• 研討會日期 : 2010-02-23
• 時間 : 15:00
• 主講人 : 徐敦盈女士
• 地點 : B110
• 演講者簡介 : 徐敦盈女士為Ph.D. in Economics，The Ohio State University (May 2010 expected)。其主要研究領域為Law and Economics、Industrial Organization。
• 演講摘要 : Pharmacy benefit managers (PBMs) are firms that administer prescription drug claims on behalf of third party payers such as insurance companies, employers, and HMOs. PBMs administer drug claims but also negotiate with both drug manufacturers and pharmacies for lower prices for both drugs and dispensing services. This research empirically investigates the price effects of vertical integration by PBMs into mail order pharmacies, as well as the effect of PBM linkages with drug manufacturers. Using a large employer dataset of employee drug purchases managed by a PBM, we find substantial effects on pricing of generic drugs when dispensing services are provided by a captive mail-order pharmacy. Despite the PBM's supposed advantage in negotiating low prices from drug manufacturers, the sum of payments per generic pill from insurance plan and enrollees was sixteen cents higher at integrated mail-order pharmacy than retail ones. This difference results in substantially (twenty cents) higher prices charged to the third-party payer. Generic drug consumers are steered to the mail-order pharmacies by lower co-payments, but the lower co-payment is more than offset by the higher reimbursements. As for brand-name drugs, mail-order pharmacies offered better deals to both plan and consumers. The advantage averages twenty cents per pill in total compared to retail pharmacy dispensing. Investigating the effect between a PBM and an affiliated manufacturer, we find that the PBM delayed adoption of generic equivalents once these were approved for use in place of the manufacturer's branded product. Generic equivalents replacing affiliated brand-name product were adopted approximately eighteen months earlier by retail pharmacies than by the PBM-controlled mail-order pharmacy. Retail pharmacy prices for generic drug prices was higher than mail-order at the first six months after the first approval, then converged rapidly to other generic equivalents in the same therapeutic category, while the same convergence did not happen for mail order pricing. As for channel switch, the plan can save fifteen cents at least for a generic taker that switched frommail-order to retail dispensing. However, plan can save seventeen cents or more if consumers taking brand-name drugs switched from retail to mail-order dispensing. The results of this research indicate that, while the overall picture is mixed, concerns over customer steering in the presence of vertical integration of mail-order pharmacies have an empirical basis for certain types of drug dispensing. The data do not permit us to investigate whether the lower prices observed for branded drugs would be achievable if the mail-order dispensing was not integrated, but do suggest problems in the transition to and pricing of generic products. These findings suggest that the PBMs may have substantial discretion to steer customers to its subdividing pharmacy profitably in response to incentives arising from vertical integration.