Graduation Year


Document Type




Degree Name

Doctor of Philosophy (Ph.D.)

Degree Granting Department

Graduate School

Major Professor

Gabriel Picone, Ph.D.

Committee Member

Padmaja Ayyagari, Ph.D.

Committee Member

Andrei Barbos, Ph.D.

Committee Member

Haiyan Liu, Ph.D.

Committee Member

Abolfazl Saghafi, Ph.D.


Federal Trade Commission, healthcare cost and utilization, market power, mergers and acquisitions, non-profit hospital, pharmaceutical


This dissertation consists of four chapters each looking at one dimension of the impact of market concentration on patient well-being. The chapters are titled:

  • Chapter 1: Non-Profit Hospital Mergers: The Effect on Healthcare Costs and Utilization
  • Chapter 2: Mergers with Future Rivals: An Entry Barrier
  • Chapter 3: Can Mergers Do Good? Lessons From 25 Pharmaceutical Mergers
  • Chapter 4: Retail Pharmacy Mergers: The Case of Walgreens and

Chapter 1 has been published in the International Journal of Health Economics and Management ( It examines a non-profit hospital merger. Merger courts offer leniency to non-profit cases on the premise that they may not harm patients. In this work I cast doubt on the merits of the leniency. I use the Synthetic Control Method to study a 2010 non-profit hospital merger in Ohio, and I find strong evidence that the merger has increased payments by 123% and reduced the utilization of childbirth services by 23%. Also, it provides the first empirical evidence for the formerly untested conjecture of Town, Wholey, Feldman, and Burns (2006) that mergers increase out-of-pocket payments. Last, I show that the effect of market power on market outcomes is asymmetric: the increase in payments and welfare loss created by a merger persist after the merger is rescinded. Thus, it may not suffice to rescind harmful mergers. It is essential to deny them before they proceed. Chapter 2 provides empirical grounds for the 2010 FTC statement that mergers between incumbents and future rivals may lead to higher prices and lower welfare. Lacking evidence, the FTC has avoided using the statement in litigation. I study a pharmaceutical merger where a major incumbent purchases a future rival who is not in the market yet, but owns promising drugs pending FDA approval. Using Truven Health MarketScan® data in a difference-in-difference setting, I demonstrate that shortly after the merger, the incumbent increases its average wholesale prices by 24.2% in one market and 2.8% in another. This upstream price increase is mirrored downstream where patients face 24.6% and 2.7% higher retail drug prices in the respective markets. Merging with future rivals creates an entry barrier that undermines antitrust enforcement. It allows incumbents to deter entry indefinitely as long as they scout for and take over rivals before entry. A variation of the barrier applies to cases where the future trajectory of small fringe firms is sufficiently predictable, allowing incumbents to take over them before they become “a big deal.” Especially, the software-industry giants have been using the barrier to neutralize start-ups since the 1980s (Cabral 2018) and it is crucial to identify and address it. Chapter 3 complements chapter two by looking at 18 mergers between branded drug manufacturers and 7 mergers between generic manufacturers. The approach is similar: I use a DiD specification and I study the market for antiviral drugs. Including a larger group of mergers, this chapter provides findings that are more generalizable. I find that merger outcomes heavily rely on merger characteristics. For example, mergers that target efficiency gains, such as those between drug manufacturers and information technology firms, are among the least harmful types and may not lead to higher prices. But many other types can dramatically increase prices. It includes horizontal mergers between immediate rivals, mergers that diversify a party’s drug portfolio, and mergers that expand the presence of a firm to new locations. Also, mergers that are smaller than $1 billion tend to raise prices more aggressively compared to larger mergers. Last, mergers between generic manufacturers tend to increase prices while mergers between branded manufacturers likely boost the quantity of sales. Chapter 4 uses a novel approach to test if firm cost-savings trickle down to consumers. Particularly, it examines the retail pharmacy merger between Walgreens and to test whether it has led to reduced wholesale drug prices (cost-savings) and whether it has led to reduced retail prices (trickle down effect). I use the Truven MarketScan data in a Difference-in-Difference setting, using time and market concentration as the two dimensions of differencing. Doing so, I confirm that the merger has added to Walgreens’ market power which has led to lower wholesale prices. But it has not benefitted patients by reducing retail prices. Instead, Walgreens has leveraged its market power against payers to boost retail prices. It shows that even when mergers achieve cost-savings, it may not trickle down to patients. Thus, cost-savings are invalid justifications for allowing mergers to proceed. This chapter also provides further confirmation for the claim in chapter two that mergers between incumbents and fringe firms can be used to circumvent antitrust enforcement.

Included in

Economics Commons