Homework (Ch 16) Back to Assignment 6. Individual Problems 16-6 Pharmaceutical Benets Managers (PBMs) are intermediaries between upstream drug manufacturers and downstream insurance companies. They design formularies (lists of drugs that insurance will cover) and negotiate prices with drug companies. PBMs want a wider variety of drugs available to their insuraEl populations, but at low prices. Suppose that a PBM is negotiating with the makers of two nondrowsy allergy drugs, Clarltln and Allegra, for inclusion on the formulary. The \"value" or \"surplus" created by Including one nondrowsy allergy drug on the formulary ls $228 million, but the value of adding a second drug ls only $68 million. Assume the FEM bargains by telling each drug company that It's 90an to reach an agreement with the other drug company. Under the nonstrategic view of bargaining, the FEM would earn a surplus of s milllon, while each drug company would earn a surplus of 5 million. Now suppose the two drug companies merge. What is the likely postmerger bargaining outcome? Under the nonstrategic View of bargaining, the FEM would eam a surplus of s milllon, while the merged drug company would earn a surplus of s _ million. 7 Grade it Now Save 8- Contlnue Conlinue without saving