Concentration among industriessuch as medical supplies or pharmaceutical manufacturers can leadto near-monopoly conditions and drive up costs. (Photo:Shutterstock)

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Consolidation of industries and lack of competition has been anongoing issue for health care delivery—and a new report illustrateshow some companies dominate sectors of health care that have adirect impact on costs to consumers and insurance plans.

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The report, “America's Concentration Crisis,” was releasedby the Open Markets Institute, based on research by IBISWorld.Although most of the concern about consolidation in health careusually focuses on insurance companies or provider systems, thisreport outlines how industries such as medical supplies orpharmaceutical manufacturers can also be concentrated among a fewnames. This concentration can lead to near-monopoly conditions anddrive up costs, the institute said.

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Related: Health system consolidation: Can employer groups,brokers survive it?

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“Our national healthcare debate too often misses the role ofmonopoly in driving up health care costs,” says Open Markets policydirector Phil Longman. “What this report shows is that exorbitantprices in health care are largely a symptom of increasinglyconcentrated health care markets and that more rigorous antitrustenforcement is essential to solving America's healthcarecrisis.”

Pharmacy and medical devices

The report outlines how a number of multi-billion dollar marketsin health care are dominated by just a few companies.

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For example, 61 percent of the $271 billion retail pharmacymarket is controlled by just two companies, Walgreens (32 percent)and CVS (29 percent). Rite Aid is the only other major player,accounting for 6 percent of the market. Other companies make up theremaining 33 percent.

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In the area of pharmacy benefit management, a $453 billionindustry, four firms control 75 percent of the market. CVS (30percent), Express Scripts (23 percent), Unitedhealth (15 percent),and Humana (7 percent) are the main players, with other companiesaccounting for 25 percent of the market.

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In medical devices, a $39.2 billion industry, Medtronic is adominant player. The report finds Medtronic controlling 41 percentof the overall medical device market, with General Electric at 19percent, Abbott at 10 percent, and Danaher at 7 percent. Othercompanies split 23 percent of market share.

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Medtronic also dominate the $1.8 billion pacemaker manufacturingmarket, with 52 percent of market share. Abbott comes in at 23percent and Boston Scientific is at 14 percent; other companiesaccount for 11 percent of the market. As the report notes, thismeans 89 percent of the market is split between threecompanies.

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But market dominance also exists in smaller, more specializedindustries that also play a role in health care costs. In the $3.8billion market for syringes & injection needle manufacturing,one company, Becton, Dickson and Company, controls 64 percent ofthe market. Medtronic controls another 5 percent, and other firmscontrol the remaining 34 percent.

Health care services are also concentrated

Services, whether involving direct medical care or things likepatient financing, can also be consolidated among just a fewplayers. In the $24.4 billion dialysis center market, two companies92 percent of the market. Fresnius is at 49 percent, DaVitaaccounts for 43 percent, and other companies make up 8 percent ofthe market.

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One company, Synchrony, accounts for nearly 50 percent of themedical patient financing market, where clinics offer third-partyloans to patients to help pay for services. Synchrony's 49 percentof the market is the largest percentage, but Citigroup has 19percent of the market, Wells Fargo has 9 percent and othercompanies account for the remaining 23 percent.

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The $6 billion health care consultant market, where companiesprovide management analysis or expertise on acquisitions andmergers, is illustrative of another point: consolidation hasincreased in recent years. In 2012, the market was split four ways:the biggest slice was Other at 74 percent. Deloitee (11 percent),IMS Health Incorporated (9 percent), and Pricewaterhouse Coopers (6percent) each had relative modest shares of the market.

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In 2018, the market had changed. 76 percent of the market isshared by four groups: Accenture (27 percent), The Advisory Board(20 percent), Deloitte (19 percent), Huron (10 percent), and Otheris now at 24 percent.

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The report raises warnings about what the growing consolidationmeans for American consumers. “Such concentration is not unique toone or two economic sectors. It is persistent across a diverserange of industries,” the report said. “As the charts alsoillustrate, monopolistic corporations often present themselves aschampions of consumer choice. But while it may appear as thoughthere are endless brands to choose from online and on the shelf,most are owned by a few large parent companies, the array of labelsa mere façade creating the illusion of abundant options.”

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