ABSTRACT
This chapter examines the market structure of the pharmaceutical industry in South Africa and the legal environment in which it operates. The South African pharmaceutical industry is a microcosm of the world pharmaceutical market in that virtually all major multinational pharmaceutical manufacturers operate and also perform R&D in the country. The pharmaceutical industry operates in two distinct markets or sectors: the private and the state. In the private sector doctors may be part of health maintenance organizations (HMOs) or independent practice associations (IPAs) linked contractually to one or another medical insurer and hence confined to the formulary approved by the relevant pharmacy benefit managers (PBM) mechanism. In the public market firms obtain business by participating and being the winners to a sealed-bid tender process for the right to supply a therapeutic market. The chapter seeks to verify these findings by conducting a microeconomic examining firm rivalry and its resulting product rivalry within the therapeutic submarkets in which firms compete.
