ABSTRACT
This chapter focuses on the provision of medicines to the less-developed countries, and highlights the deficiencies in the existing market system by which this provision is made. In the pharmaceutical industry, the main determinant of high concentration levels in sectors like steel or automobiles — economies of scale in production — is absent at the level of formulation. The tendency is strengthened in the pharmaceutical industry because the complete separation of identity between the buyer and the decision-maker eliminates any direct pressure on the latter to ‘economise’ in the normal sense of the word. The chapter discusses some indications of the monopolistic or market power, which suggest that the leading firms do possess competitive advantages over small ones, and so are able to earn higher profits, charge higher prices and exercise greater influence on the prescribers. All indicators support the case that the dominant firms exercise considerable market power in the drug industry.
