What do Ticketmaster and Pharmacy Benefit Managers have in common?

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Popular American singer and songwriter, Taylor Swift, released her newest album ‘Midnights’ in October. The album quickly became the most-streamed album in 24 hours on Spotify, with 184.6 million streams, according to Guinness World Records.

Following the release, the artist sought to work with Ticketmaster, a company who arguably has a monopoly on all ticket sales in the country, for pre-sale tickets for her new ‘Eras’ tour. But shortly after online pre-sale started for the tour on Tuesday, November 15th, Ticketmaster canceled the public on-sale that was supposed to take place on Friday, after the site had sold 2 million tickets and saw long wait times and temporary outages.

The CEO of Liberty Media, Live Nation’s largest shareholder Greg Maffei, explains what occurred saying, “The site was supposed to open up for 1.5 million verified Taylor Swift fans. We had 14 million people hit the site, including bots, which are not supposed to be there.”

How is Ticketmaster getting away with this? The company has monopolized the ticket sale market, particularly after merging with Live Nation in 2010. With very small and practically non-existent competitors, Live Nation controls 70 percent of the ticketing and live event venues market and gives artists and venues no choice but to sell through them. This marketing power becomes dangerous as Ticketmaster has free reign to price gouge and add extra charges, increasing consumer costs to attend events.

Pharmacy benefit managers (PBMs), similar to Ticketmaster, are third-party administrators of prescription drug programs that are primarily responsible for processing and paying prescription drug claims. As Wayne Winegarden notes in his study, “The Economic Costs of Pharmacy Benefit Managers,” due to their government sponsored ‘near-monopoly’ position, PBMs can charge fees that are high and retrospective.

PBMs incentivize higher list prices in order to negotiate discounts and rebates that benefit them. Patient insurance, however, is based on list prices. So as PBMs incentivize higher list prices that hurt consumers and drive drugs costs up, PBMs benefit from decreasing net prices (the price of drugs after discounts and rebates are added).

Now, although there is not just one monopolized PBM as there is for ticket sales in Ticketmaster, there is an oligopoly. The three major PBM players that have limited the competition and hold most of the market power are Express Scripts, CVS Caremark and OptumRx. They control approximately 89 percent of the market and serve around 270 million Americans – not too far off Ticketmaster and Live Nation’s control of 70 percent of the ticket and sales market. PBMs primarily earn profits very similar to Ticketmaster – through administrative fees charged for their services. Because of the limited competition in both pharmaceutical drugs and ticket sales, the limited competition and enormous market power both have in each industry allow PBMs and Ticketmaster to take advantage of the system, placing more money in their pockets.

Ticketmaster has taken advantage of their market power, gouging ticket sale prices and working with ticket scalpers to earn more cash along the way. Their website and regulations pose that they do not allow ticket scalpers or bots to purchase tickets in mass for resale, however, back in 2018 undercover reporters from the CBC and Toronto Star uncovered the scheme at a ticket scalping convention in Vegas.

The Ticketmaster Trade Desk sales executive told the reporters, “We don’t spend any time looking at your Ticketmaster.com account. I don’t care what you buy. It doesn’t matter to me.” The Trade Desk staff were aware their users were harvesting tickets using multiple Ticketmaster accounts.

“(Ticketmaster’s) willing embrace of ticket reseller activity on its website is a core part of its business model as is the enhanced profits that (Ticketmaster) obtained from double-dip commissions,” said Richard Powers, associate professor at University of Toronto’s Rotman School of Management.

What sets PBMs and Ticketmaster apart? PBMs have the safety net of the government protecting them. Government regulations create barriers to entry for PBMs and allow the big three to continue to exploit the system.

Ultimately, both patients and avid entertainment fans are feeling the consequences of power and profit hungry PBMs and Ticketmaster as they pay more and more each year for tickets and prescription drugs while the powerful companies rake in more and more cash. Maybe we will see a day when fair and checked power of these industries will provide consumers concert tickets and prescription drugs that are not thousands of dollars.

Emily Humpal is deputy communications director at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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