Economists INK: A Brief Analysis of Policy and Litigation

This issue considers cross-market hospital mergers, “killer acquisitions” in the pharmaceutical industry, and the proposal to create the Southeastern Energy Exchange Market (“SEEM”). Lona Fowdur and Cagatay Koc discuss the California Attorney General’s Office’s reliance on “plus factors” in its review of the merger between Huntington Hospital and Cedars-Sinai Health System. Dr. Fowdur and Dr. Koc indicate that the establishment of careful screens, consistent with the economic literature, would provide a more rigorous framework for analyzing cross-market mergers. Jason Albert discusses a recent article by Colleen Cunningham, Florian Ederer, and Song Ma in the Journal of Political Economy on “killer acquisitions.” Dr. Albert discusses the authors’ findings, as well as some limitations in their analysis, and concludes that more research is needed on both the extent and economic significance of “killer acquisitions” in the pharmaceutical industry as well as other innovative sectors. Jeffrey Opgrand and Natalie Shen discuss the proposal by several entities in the Southeast to create SEEM — a bilateral, 15-minute market for energy transactions. The stated purpose of SEEM is to facilitate bilateral energy sales between members to decrease consumer costs. However, FERC issued a deficiency letter. The SEEM parties have responded to the deficiencies identified in their initial filing, and FERC will have to decide whether to encourage this modest step toward integration.

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