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Downstream price effect of upstream monopolization: Isoniazid as a case study

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  • Shao, Yifu

Abstract

This paper examines the downstream price effect of an anti-monopoly case involving the Isoniazid active pharmaceutical ingredient (API) in China. Using a synthetic control method, I find that the downstream price is 332.9% of the estimated counterfactual level. The cost-passthrough rate is 502.3% in this case. This surprisingly high rate raises concerns about firm conduct beyond cost shifts, indicating a need for antitrust scrutiny to shift toward the downstream market.

Suggested Citation

  • Shao, Yifu, 2025. "Downstream price effect of upstream monopolization: Isoniazid as a case study," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525005142
    DOI: 10.1016/j.econlet.2025.112677
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    References listed on IDEAS

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    1. Sharat Ganapati & Rebecca McKibbin, 2023. "Markups and Fixed Costs in Generic and Off-Patent Pharmaceutical Markets," The Review of Economics and Statistics, MIT Press, vol. 105(6), pages 1606-1614, November.
    2. Shengmao Cao & Lisa Xuejie Yi & Chuan Yu, 2024. "Competitive Bidding in Drug Procurement: Evidence from China," American Economic Journal: Economic Policy, American Economic Association, vol. 16(3), pages 481-513, August.
    3. Clark, Robert & Fabiilli, Christopher & Lasio, Laura, 2022. "Collusion in the US generic drug industry," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    4. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    5. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528-583.
    6. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
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    More about this item

    Keywords

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    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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