Businessmen with bows and arrowsWhen it comes to preventing monopolistic behaviors by corporationsin the health care sphere, federal and state agencies have beenasleep at the switch.

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Although the benefits world has been focused on consolidationamong carriers, providers and pharmacy groups, other areas ofhealth care are also seeing market domination by a handful ofplayers. The consolidation of market share in industries such asmedical device manufacturers, medical supplies and health careservices are surely significant factors in rising health care costsfor employer-sponsored health plans, yet much of it has happenedunder the radar.

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In a recent report, "America's Concentration Crisis," the OpenMarkets Institute outlines many areas of health care that are nowdominated by just a few companies. "Growing monopoly power in thehealth care sector contributes significantly to the high prices,poor quality, and lack of access that millions of Americansexperience when interacting with the health care system," thereport says. The report adds that for both consumers and employers,some large companies may produce numerous brands and productslines, but control of the markets remain in the hands of just a fewplayers.

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

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"Monopolistic corporations often present themselves as championsof consumer choice," the Open Markets report says, "but while itmay appear as though there are endless brands to choose from onlineand on the shelf, most are owned by a few large parent companies,the array of labels a mere façade creating the illusion of abundantoptions."

Drugs, devices, services

A wide range of industries were analyzed by the report, fromambulance manufacturing to medical waste disposal services, butprobably the best place to start is the industry whereconsolidation and lack of competition is most well known—thepharmacy sector.

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The report found that 61 percent of the $271 billion retailpharmacy market is controlled by just two companies, Walgreens (32percent) and CVS (29 percent). Rite Aid is the only other majorplayer, accounting for 6 percent of the market. Other companiescombine to make up the remaining 33 percent. In the area ofpharmacy benefit management, a $453 billion industry, four firmscontrol 75 percent of the market. CVS (30 percent), Express Scripts(23 percent), UnitedHealth (15 percent), and Humana (7 percent) arethe main players, with other companies accounting for 25 percent ofthe market.

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Familiar names also dominate the medical devices field, which isa $39.2 billion industry. Medtronic controls 41 percent of theoverall medical device market, General Electric 19 percent, Abbott10 percent, and Danaher 7 percent. Other companies split theremaining 23 percent of market share.

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Medtronic also dominates the $1.8 billion pacemakermanufacturing market, with 52 percent of market share. Abbott comesin at 23 percent and Boston Scientific is at 14 percent; othercompanies account for 11 percent of the market. As the reportnotes, this means 89 percent of the market is split between threecompanies.

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Market dominance also exists in smaller, more specializedindustries, the report shows. In the $3.8 billion market forsyringes and injection needle manufacturing, one company, Becton,Dickson and Company, controls 64 percent of the market. Medtroniccontrols another 5 percent, and other firms control the remaining34 percent.

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Services, whether involving direct medical care or things likepatient financing, can also be consolidated among just a fewplayers. For example, in the $24.4 billion dialysis center market,two companies control 92 percent of the market. Fresenius is at 49percent, DaVita accounts for 43 percent, and other companies makeup 8 percent of the market.

A growing sense of concern

According to Barry Lynn, executive director of the Open MarketsInstitute, his group sees corporate consolidation as a major shiftin the nation's economy. "All of these problems that we've beenwitnessing—inequality, lower wages, less mobility—wherever you lookin our economy, you see these problems," he says. "They're allconnected by the fact we changed how we do competition policy."

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Lynn says a gradual shift to concentrate market share into thehands of fewer and fewer players was not something the public wasfocused on in past years, but that has changed.

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"This issue has exploded, largely because of what's happeningwith Google, Facebook and Amazon," he says. "A lot of new pollingshows concern about concentrated corporate power skyrocketingacross the board."

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When it comes to health care industries, Lynn starts with theconsolidation of hospitals and clinics as an example. "If yourinsurance costs are continuing to grow, what's behind that? You'vegot hospital corporations that have monopolized regions all acrossthe country—Pittsburgh, Baltimore, Cleveland—where one corporationcaptures de facto control of the market," he says. "Wherever yousee that kind of consolidation, the price of hospital beds andhealth care skyrockets."

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Lynn notes that lack of competition can affect many parts of theindustry, including supply, pricing, and labor. "It's bad fordoctors and nurses," he says. "They have fewer places to go—if theydon't like their boss, it's just harder to find another place towork."

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The new study documents the monopolistic approach in severalindustries. "The entire medical device industry is a bunch ofextremely concentrated marketplaces," Lynn says. "You end up withduopoly markets where people trade off control of differenttherapies. The prices are way higher than they should be because ofconsolidation of manufacturing and production—and the hospitalspass those prices on."

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An example of this may be found in the report's analysis of theX-ray machine and PET scanner manufacturing markets. For the $10.2billion X-ray machine manufacturing market, General Electriccontrols 24 percent of the market, Siemens has 13 percent, andPhilips has 12 percent of the market. Other companies are creditedwith 47 percent of the market.

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For the PET scanner market, the players are shuffled: Siemens isthe largest player at 36 percent of the market, GE has 25 percent,and Philips Healthcare has 21 percent, leaving 18 percent of themarket to other companies.

What can purchasers do?

When it comes to preventing monopolistic behaviors bycorporations in the health care sphere, Lynn and others say federaland state agencies have been asleep at the switch. A 2017 study inHealth Affairs found that health systems were gobbling up physicianpractices, but that the practices in question seemed to be small,so the acquisitions did not draw attention from federal regulators.It's not hard to see how a large hospital system surrounded bysmaller clinics could quickly become the dominant player in theregion.

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"Most of the increases in physician practice size and marketconcentration resulted from numerous small transactions, ratherthan a few large transactions," the Health Affairs report said."Furthermore, most acquisitions were below the dollar thresholdsthat would have required the parties to report the transaction toantitrust authorities. Under present mechanisms, federalauthorities have only limited ability to counteract consolidationin most U.S. physician markets."

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Lynn says stakeholders should lobby for stricter enforcement ofantitrust laws. He suggests it might be easier to start at thestate level, but adds that if employer-based insurance plans canshow harm, regulators will have to take their cases seriously.

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Without public pressure, many corporations may continue to evaderegulatory scrutiny. Lynn says federal regulators have approvedmerger deals that are clearly monopolistic, and that there simplyhasn't been the political will to reign in corporations.

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"This stuff could be fixed by the DOJ and the FTC tomorrow," hesays. "There is an ample amount of power in federal and stategovernments to address this, it's just not being used." The result,he adds, is concentrated markets that promise to bring efficiencybut have more self-interest in raising prices. The higher costs area burden to small and large businesses alike.

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"This affects everyone; it affects Walmart the same way itaffects Joe's Plumbing," Lynn says. "These health care companiesused to compete; they should be competing now."

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