Assessing the Consequences for Competition
Chapter 7: Structure and Competitive Process in Pharmaceuticals Markets
7.0 INTRODUCTION The purpose of this chapter is to provide the background for the detailed analysis of individual merger cases and remedies in the pharmaceuticals sector in Chapter 8. It is our view that a deep understanding of an industry is necessary both to identify an appropriate model suitable for estimating potential harm and remedy analysis, and to understand how the results of a necessarily simpliﬁed quantitative analysis should be interpreted sensitively. Since pharmaceuticals markets are so complex, this chapter is rather long and the reader may prefer to read it selectively. There are ten sections. The ﬁrst three set the scene: Section 7.1 deﬁnes the industry/sector; Section 7.2 provides some brief information on broad aggregates and trends, and an assessment of the standing of the European industry in the world as a whole; and Section 7.3 identiﬁes the leading ﬁrms, and describes their alternative corporate structures. After these preliminaries, the remainder of the chapter provides a detailed assessment of the nature of the competitive process in pharmaceuticals. This serves three purposes. First, it analyses the main modes of competition in the industry, which is the essential starting point in model selection. Second, it begins to quantify magnitudes that are often available for individual products, and so provides a ﬁrst step towards calibration. Third, it sets out the very special and important regulatory context of pharmaceuticals, particularly in relation to the buying and remuneration policies of national health insurance authorities in Europe. 7.1 DEFINING THE SECTOR This...
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