slides10 - Competition Drug Pricing and Profits Research...

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Competition Drug Pricing and Profits Research and Development Effects of Insurance Supply of health care – Pharmaceuticals Angela Fertig Spring 2010 Angela Fertig Supply of health care – Pharmaceuticals
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Competition Drug Pricing and Profits Research and Development Effects of Insurance Competition I There appears to be just a few big pharmaceutical companies – is price high because lack of competition? I Concentration Indicators I four-(eight-)firm concentration ratio (C4/8) – share of industry output produced by 4 (8) largest firms I Herfindahl-Hirschman Index (HHI) = n i =0 share 2 i I 1 dominant firm, HHI = 85 2 + 5 2 + 5 2 + 5 2 = 7300 I 100 small firms, HHI = 1 2 * 100 = 100 Note: lower number means more competition Angela Fertig Supply of health care – Pharmaceuticals
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Competition Drug Pricing and Profits Research and Development Effects of Insurance Concentration Indicators From ‘Concentration Ratios in Manufacturing 2002’ Industry C 4 C 8 HHI Pharmaceutical preparations 36 53 530 Cereal breakfast foods 82 93 3000 Soaps and detergents 63 74 2308 Paints 34 52 423 Petroleum refining 41 64 640 Computer and peripheral equipment 50 65 1183 Motor vehicles 81 91 2324 Aircraft and parts 77 82 2528 Photographic equipment 37 54 523 Angela Fertig Supply of health care – Pharmaceuticals
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Competition Drug Pricing and Profits Research and Development Effects of Insurance What do these mean? Substantial competition, but misleading, because within a drug class, top four firms control almost all of the market: I patents I advertising increases brand loyalty I FDA approval Angela Fertig Supply of health care – Pharmaceuticals
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Competition Drug Pricing and Profits Research and Development Effects of Insurance Drug Pricing and Profits I Monopoly Pricing I
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  • Spring '11
  • Ferig
  • Angela Fertig, Competition Drug Pricing and Profits Research and Development Effects of Insurance, Competition Drug Pricing

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