Annika Herr

Quality and Welfare in a Mixed Duopoly with Regulated Prices: The Case of a Public and a Private Hospital

Abstract Hospital markets are often characterized by price regulation and the existence of different ownership types. Using a Hotelling framework, this paper analyses the effect of heterogeneous objectives of hospitals on quality differentiation, profits and overall welfare in a price-regulated duopoly with exogenous symmetric locations. In contrast to other studies on mixed duopolies, this paper shows that, in this framework, privatization of the public hospital may increase overall welfare. This holds if the public hospital is similar to the private hospital or less efficient and competition is low. The main driving force is the single-regulated price which induces under-provision (over-provision) of quality of the more (less) efficient hospital compared with the first best. However, if the public hospital is sufficiently more efficient and competition is fierce, a mixed duopoly outperforms both a private and a public duopoly due to an equilibrium price below (above) the price of the private ( public) duopoly. This medium price discourages over-provision of quality of the less efficient hospital and - together with the non-profit objective - encourages an increase in quality of the more efficient public hospital.

Cost and technical efficiency of German hospitals: does ownership matter?

This paper is the first to investigate both the technical and cost efficiency of more than 1500 German general hospitals. More specifically, it deals with the question how hospital efficiency varies with ownership, patient structure, and other exogenous factors, which are neither inputs to nor outputs of the production process. The empirical results for the years from 2001 to 2003 indicate that private and non-profit hospitals are on average less cost efficient and less technically efficient than publicly owned hospitals. The hospital rankings based on estimated efficiency scores turn out to be negatively correlated with average length of stay, which is highest in private hospitals. The results are derived by conducting a Stochastic Frontier Analysis assuming both Cobb-Douglas and translog production technologies and using a newly available and multifaceted administrative German data set.

Profit efficiency and ownership of German hospitals

This paper investigates the cost and profit efficiency of German hospitals and their variation with ownership type. It is motivated by the empirical finding that private (for-profit) hospitals - having been shown to be less cost efficient in the past - on average earn higher profits than public hospitals. We conduct a Stochastic Frontier Analysis on a multifaceted administrative German data set combined with the balance sheets of 541 hospitals of the years 2002-2006. The results show no significant differences in cost efficiency but higher profit efficiency of private than of publicly owned hospitals.

The Welfare Impact of Parallel Imports: A Structural Approach Applied to the German Market for Oral Anti-Diabetics

We investigate the welfare impact of parallel imports using a large panel data set containing monthly information on sales, ex-factory prices, and further product characteristics for all 700 anti-diabetic drugs sold in Germany between 2004 and 2010. We estimate a two-stage nested logit model of demand and, based on an oligopolistic model of multiproduct firms, we then recover the marginal costs and markups. We finally evaluate the effect of the parallel imports’ policy by calculating a counter-factual scenario without parallel trade. According to our estimates, parallel imports reduce the prices for patented drugs by 11% and do not have a significant effect on prices for generic drugs. This amounts to an increase in the demand-side surplus by e19 million per year (or e130 million in total) which is relatively small compared to the average annual market size of around e227 million based on ex-factory prices. The variable profits for the manufacturers of original drugs from the German market are reduced by e18 million (or 37%) per year when parallel trade is allowed, yet only one third of this difference is appropriated by the importers.

Higher prices, higher quality? Evidence from German nursing homes

OBJECTIVES This study investigates the relationship between prices and quality of 7400 German nursing homes. METHOD We use a cross section of public quality reports for all German nursing homes, which had been evaluated between 2010 and 2013 by external institutions. Our analysis is based on multivariate regressions in a two stage least squares framework, where we instrument prices to explain their effect on quality controlling for income, nursing home density, demographics, labour market characteristics, and infrastructure at the regional level. RESULTS Descriptive analysis shows that prices and quality do not only vary across nursing homes, but also across counties and federal states and that quality and prices correlate positively. Second, the econometric analysis, which accounts for the endogenous relation between negotiated price and reported quality, shows that quality indeed positively depends on prices. In addition, more places in nursing homes per people in need are correlated with both lower prices and higher quality. Finally, unobserved factors at the federal state level capture some of the variation of reported quality across nursing homes. CONCLUSION Our results suggest that higher prices increase quality. Furthermore, since reported quality and prices vary substantially across federal states, we conclude that the quality and prices of long-term care facilities may well be compared within federal states but not across.

Stabilität und Wandel von Arbeitsmarktinstitutionen aus wettbewerbsökonomischer Sicht

ZusammenfassungDieser Beitrag fasst die Ergebnisse unserer industrieökonomischen, theoretischen Forschung zur Fragestellung von Stabilität und Wandel von Arbeitsmarktinstitutionen zusammen. Wir verfolgen dabei einen wettbewerbsökonomischen Forschungsansatz, der Marktmacht sowohl auf Arbeits- als auch auf Absatzmärkten unterstellt. In der Literatur hat sich hierfür der Begriff unionised oligopolies eingebürgert. Damit wird zum Ausdruck gebracht, dass die verwendeten Modelle einerseits Verhandlungsmacht auf Arbeitsmärkten und andererseits unvollständigen Wettbewerb – und somit Marktmacht – auf Absatzmärkten berücksichtigen. Kern ist die Analyse von Wechselwirkungen zwischen Organisationsformen auf Arbeitsmärkten und Wettbewerbsverhältnissen auf Produktmärkten. In unserer Forschung analysieren wir aktuelle Entwicklungen auf dem deutschen Arbeitsmarkt wie die Einführung sektorspezifischer Mindestlöhne, die Rolle von Spartengewerkschaften, Formen der Gewinnbeteiligung von Arbeitnehmern sowie internationale Wettbewerbsaspekte wie die Verlagerung der Produktion durch internationale Unternehmen ins Ausland.AbstractThis contribution gives an overview of the main results of our theoretical research on the stability and change of labour market institutions. We use so-called models of unionised oligopolies which are borrowed from the theory of industrial organization in order to analyse the effects of simultaneous market power in both labour and product markets. The focus of our research is on the interaction between various organisational structures of labour markets and different forms of product market competition. In particular, we analyse some recent developments in Germany, such as the introduction of sector-specific minimum wages, the formation of craft unions, the increasing number of profit sharing contracts as well as the relocation of production facilities to foreign countries.

Does Higher Cost Inefficiency Imply Higher Profit Inefficiency? Evidence on Inefficiency and Ownership of German Hospitals

This paper investigates cost and profit efficiency of German hospitals. More specifically, it deals with the question how hospital efficiency varies with ownership, patient structure,and other exogenous factors, which are neither inputs nor outputs of the production process. We conduct a Stochastic Frontier Analysis (SFA) on a multifaceted administrative German dataset combined with the balance sheets of 374 hospitals for the years 2002 to 2005.The results indicate that private (for-profit) and (private) non-profit hospitals are on average less cost efficient but more profit efficient than publicly owned hospitals.

Tiered co-payments, pricing, and demand in reference price markets for pharmaceuticals

Health insurance companies curb price-insensitive behavior and the moral hazard of insureds by means of cost-sharing, such as tiered co-payments or reference pricing in drug markets. This paper evaluates the effect of price limits - below which drugs are exempt from co-payments - on prices and on demand. First, using a difference-in-differences estimation strategy, we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand-name drugs in the German reference price market. Second, estimating a nested-logit demand model, we show that consumers appreciate co-payment exempt drugs and calculate lower price elasticities for brand-name drugs than for generics. This explains the different price responses of brand-name and generic drugs and shows that price-related co-payment tiers are an effective tool to steer demand to low-priced drugs.

Cost-Sharing and Drug Pricing Strategies: Introducing Tiered Co-Payments in Reference Price Markets

Health insurances curb price insensitive behavior and moral hazard of insureds through different types of cost-sharing, such as tiered co-payments or reference pricing. This paper evaluates the effect of newly introduced price limits below which drugs are exempt from co-payments on the pricing strategies of drug manufacturers in reference price markets. We exploit quarterly data on all prescription drugs under reference pricing available in Germany from 2007 to 2010. To identify causal effects, we use instruments that proxy regulation intensity. A difference-in-differences approach exploits the fact that the exemption policy was introduced successively during this period. Our main results first show that the new policy led generic firms to decrease prices by 5 percent on average, while brand-name firms increase prices by 7 percent after the introduction. Second, sales increased for exempt products. Third, we find evidence that differentiated health insurance coverage (public versus private) explains the identifed market segmentation.

Wettbewerb und Rationalisierung im deutschen Arzneimittelmarkt: Ein Überblick

ZusammenfassungIn diesem Artikel werden verschiedene deutsche Regulierungsansätze zur Stärkung des Wettbewerbs und der Effizienz durch Rationalisierung im Arzneimittelmarkt beschrieben und ökonomisch bewertet. Der Schwerpunkt der Analyse liegt einerseits auf der neuen Erstattungsregulierung des Arzneimittelmarkt-Neuordnungsgesetzes (AMNOG, seit 2011) für neue, patentierte Arzneimittel. Dabei sind speziell die frühe Nutzenbewertung und die Ergebnisse der ersten zehn Preisverhandlungen im Fokus. Es zeigt sich, dass diese stark durch die Ergebnisse der Bewertung beeinflusst werden. Außerdem kann die frühe Nutzenbewertung eine direkte Einordnung in eine Festbetragsgruppe zur Folge haben. Um die Auswirkungen dieses Instruments auf den Wettbewerbsdruck auf das neue Arzneimittel bewerten zu können, werden drei Instrumente des generikafähigen Marktes (Festbeträge, Rabattverträge und Zuzahlungsbefreiungsgrenzen) vorgestellt. Es wird deutlich, dass sich die verschiedenen, meist kostensenkenden, Regulierungsansätze überlappen und beeinflussen können.AbstractThis article discusses several regulations and their effects on rationalisation and competition in the German pharmaceutical market. On the one hand, the focus of the analysis lies on the new ways to determine refund amounts for new, innovative drugs directed through the “Act to Reorganize the Phamaceuticals’ Market in the German SHI System (AMNOG)”. In that part, the so-called ‘early benefit analysis’ and the ten first negotiated rebates play a big role. Furthermore, the early-benefit analysis may result into the grouping into an existing reference price group. To analyse the effects of that instrument on competition faced by the new drug, we also introduce three instruments that are important for generics (reference pricing, rebate contracts and copayment exemption levels). The analysis shows that many different regulations, mainly to reduce costs, exist in one market and may also influence each other. Furthermore, negotiation outcomes differ by the results of the early-benefit analysis and are also driven by the negotiators’ power.