The Wall Street Journal called insurers the “new 800 pound gorilla” in an article Wednesday, analyzing the leverage the industry’s biggest players have gained through pending mergers.
In case you forgot, Anthem seeks to buy Cigna for $48 billion, while Aetna seeks to buy Humana for $34 billion, although both deals still need to be approved by federal regulators.
Consumer advocates worry that such mergers will make the insurance marketplace uncompetitive, and studies have shown that consumers in many areas of the country do not have many insurance options.
In response, insurers have emphasized the potential benefits of their mammoth sizes, notably their ability to leverage their resources to negotiate better deals with hospitals, doctors, and drug companies for the cost of services and pills.
In the wake of public outcry over the skyrocketing cost of many prescription drugs, there may be more appetite than usual for big insurance companies, so long as they use their strength to bully pharmaceutical companies. Of course, drug companies will no doubt raise the prospect that insurers with too much power could make the drug industry less profitable and make it harder to attract investment for research into new or better medicine.
A recent demonstration of Anthem’s might comes from a $15 billion lawsuit it launched against Express Scripps Holding, a pharmacy benefit company. Anthem contends Express Scripps bilked it of billions by overcharging for medications.
The Journal notes that it is anybody’s guess whether the suit will be successful, or whether Anthem will settle for a substantially lower amount of money, but the announcement already did plenty of damage to Express Scripps, whose stock has declined by 20 percent since Anthem CEO Joseph Swedish first suggested publicly in January that his company was owed money.
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