America should reward innovation that comes from integration—not punish it
In the American economy, scale is often misunderstood. When businesses grow more efficient, more agile, and more aligned across operations, critics call it consolidation. When those efficiencies lower costs, improve service, and boost innovation, critics still cry foul.
But the truth is this: vertical integration isn’t a threat to competition—it’s the engine of American competitiveness.
Vertical integration is the natural result of companies solving inefficiencies in fragmented markets. When done right, it reduces transaction costs, eliminates duplication, and creates aligned incentives that benefit the end consumer.
Whether it’s in logistics, energy, technology, or healthcare, vertically integrated firms are the ones driving real reform—not because they’re big, but because they’re connected. Take healthcare, the latest political battleground. Critics attack insurers and PBMs for being “too integrated,” accusing them of stifling competition.
“If a company lowers costs, improves access, and makes life easier for consumers, size should not be a disqualifier. What matters is performance, not structure.”
What these critics ignore is that fragmented care—separate systems for insurance, drug pricing, and treatment—is the problem. It’s why patients face redundant paperwork, conflicting incentives, and unpredictable costs.
When insurers, PBMs, and pharmacies are under one roof, there’s accountability. Data can be shared. Formularies can be optimized. Costs can be contained. Patients are guided toward lower-cost therapies, adherence improves, and employers save money. The system works better—not because it’s “big,” but because it’s coordinated.
This isn’t unique to healthcare. Amazon didn’t dominate retail by accident—it succeeded because integrating warehousing, logistics, and distribution cut delivery times and reduced overhead. Apple’s vertical control over software and hardware isn’t anticompetitive—it’s why your iPhone works seamlessly. Tesla built its own supply chain when the market couldn’t keep up. Integration made it possible.
The economic argument for vertical integration is backed by decades of theory. From Coase to Williamson, economists have long recognized that when market transactions are inefficient, firms will internalize them. That’s not a monopoly—it’s a response to friction. In industries where precision, timing, and reliability matter, vertical integration reduces waste and improves outcomes.
Yet, in Washington, vertical integration is suddenly a dirty word. Some policymakers, especially those who see every market outcome as a policy failure, would rather preserve inefficiency than let large firms reap the rewards of alignment and scale. Their solution is often to “break things up,” without asking whether the parts work better together than apart.
At the American Growth & Innovation Forum, we believe America should reward innovation that comes from integration—not punish it. If a company lowers costs, improves access, and makes life easier for consumers, size should not be a disqualifier. What matters is performance, not structure.
It’s time for a reality check. Vertical integration, when done transparently and competitively, isn’t an economic danger. It’s a sign the system is working. It means companies are investing in themselves to serve consumers better. That’s the free market at work—not something to be feared, but something to be encouraged.
