Countervailing Power in Wholesale Pharmaceuticals

22 Pages Posted: 2 Mar 2010

See all articles by Sara Fisher Ellison

Sara Fisher Ellison

affiliation not provided to SSRN

Christopher M. Snyder

Dartmouth College - Department of Economics

Abstract

Using data on wholesale prices for antibiotics sold to U.S. drugstores, we test the growing theoretical literature on ‘countervailing power’ (a term for the ability of large buyers to extract discounts from suppliers). Large drugstores receive a modest discount for antibiotics produced by competing suppliers but no discount for antibiotics produced by monopolists. These findings support theories suggesting that supplier competition is a prerequisite for countervailing power. As further evidence for the importance of supplier competition, we find that hospitals receive substantial discounts relative to drugstores, attributed to hospitals' greater ability to induce supplier competition through restrictive formularies.

Suggested Citation

ELLISON, SARA FISHER and Snyder, Christopher M., Countervailing Power in Wholesale Pharmaceuticals. The Journal of Industrial Economics, Vol. 58, Issue 1, pp. 32-53, March 2010, Available at SSRN: https://ssrn.com/abstract=1562155 or http://dx.doi.org/10.1111/j.1467-6451.2010.00408.x

SARA FISHER ELLISON (Contact Author)

affiliation not provided to SSRN

Christopher M. Snyder

Dartmouth College - Department of Economics ( email )

301 Rockefeller Hall
Hanover, NH 03755
United States
(603) 646-0642 (Phone)
(603) 646-2122 (Fax)

HOME PAGE: http://www.dartmouth.edu/~csnyder/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
1,065
PlumX Metrics