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Factors affecting bargaining outcomes between pharmacies and insurers
J M Brooks1, W Doucette, B Sorofman
1College of Pharmacy, Program in Pharmaceutical Outcomes and Policy Research, University of Iowa, Iowa City 52242, USA.
Health Services Research
|April 13, 1999
Summary
Pharmacy bargaining power in negotiations with insurers significantly varies by market, insurer, and pharmacy type. Factors like local competition and socioeconomic conditions influence this power, impacting independent pharmacies.
Area of Science:
- Health Economics
- Pharmaceutical Policy
- Market Analysis
Background:
- Pharmacy and insurer price negotiations are complex, influenced by market dynamics and provider characteristics.
- Understanding the determinants of pharmacy bargaining power is crucial for equitable contract negotiations.
Purpose of the Study:
- To model pharmacy and insurer bargaining power in price negotiations.
- To investigate how pharmacy, insurer, and market characteristics influence bargaining power.
Main Methods:
- Adapted a provider/insurer bargaining model using data from Medstat's Marketscan database (6.8 million claims).
- Incorporated data on pharmacy payments, costs, and socioeconomic information from multiple sources.
- Analyzed 17,737 claims for four selected pharmaceutical products (Zantac, Humulin, Mevacor, Dilantin).
Main Results:
- Pharmacy bargaining power shows statistically significant variation across markets, insurers, and pharmacy types.
- Market structure impacts bargaining power: negatively related to pharmacies per capita/employer, positively related to concentration.
- Higher percentages of independent pharmacies correlate with lower bargaining power; lower income and higher public assistance areas show higher pharmacy bargaining power.
Conclusions:
- Exogenous factors significantly influence pharmacy bargaining power in contract negotiations with insurers.
- Local pharmacy ownership concentration strengthens pharmacy bargaining power.
- Antitrust laws hindering collective bargaining disadvantage independent pharmacies compared to chains.