ABSTRACT
Medicines account for 20% to 60% of health spending in low- and middle-income countries, compared with 18% in countries of the Organisation for Economic Co-operation and Development. Up to 90% of the population in developing countries purchase medicines through out-of-pocket payments, making medicines the largest family expenditure item after food. 1 High prices of medicines might force people to forego treatment or go into debt. Initiatives to stimulate availability and access through manufacturing innovations, procurement mechanisms, or supply chain improvements require management of pricing to have sustainable impact. The Millennium Development Goal targets ‘in cooperation with pharmaceutical companies, [to] provide access to affordable, essential drugs in developing countries’ and also recognizes the pharmaceutical sector as an essential realm for government action and intervention. The market of pharmaceuticals is an imperfectly competitive market by definition. An imperfectly competitive market is one that shares most of the characteristics of a perfectly competitive market, for example free entry and exit of firms and the presence of many firms, but has one important monopolistic element: firms produce differentiable output rather than the homogeneous output produced by perfectly competitive firms. Thus, imperfectly competitive firms distinguish their output by brand names, colours, sizes, quality, durability and so on. 2 Roger J. van den Bergh and Peter D. Camesasca note that ‘competition policy should not seek to achieve the ideal of perfect competition, but should, instead, formulate criteria for judging to what extent an industry is workably competitive’ (emphasis added). 3 Therefore, analysing the nature of the pharmaceutical market in India in the light of the ‘structure-conduct-performance paradigm: criteria’ established by Scherer and Ross 4 for judging whether an industry is workably competitive can be of some guidance. The analysis of pharmaceutical market and industry in India as per the Scherer and Ross criteria is given in Table 13.1.
