Insurers' negotiating leverage and the external effects of Medicare Part D

"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. Public financing of private health insurance may generate external effects beyond the subsidized population, by influencing the size and bargaining power of health insurers. We test for this external effect in the context of Medicare Part D. We analyze how Part D-related insurer size increases impacted retail drug prices negotiated by insurers for their non-Part D commercial market. On average, Part D lowered retail prices for commercial insureds by 5.8% to 8.5%. The cost-savings to the commercial market amount to $3bn per year, which approximates the total annual savings experienced by Part D beneficiaries who previously lacked drug coverage"--National Bureau of Economic Research web site.