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Market Definition and Competition Policy Enforcement in the Pharmaceutical Industry

Author

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  • Georges Siotis
  • Carmine Ornaghi
  • Micael Castanheira De Moura

Abstract

We focus on market definition in the pharmaceutical industry, where the introduction of generics in different markets provide a sequence of quasi natural experiments involving a significant competitive shock for the molecule experiencing Loss of Exclusivity. We show that generic entry alters competitive constraints and generates market-wide effects. Paradoxically, entry may soften competitive pressure for some originators. We obtain these results by econometrically estimating time-varying price elasticities and apply the logic of the Hypothetical Monopolist Test to delineate antitrust markets. They provide strong empirical support to the approach consisting in defining relevant markets contingent on the theory of harm. We discuss the relevance of these findings in the context of ongoing cases.

Suggested Citation

  • Georges Siotis & Carmine Ornaghi & Micael Castanheira De Moura, 2020. "Market Definition and Competition Policy Enforcement in the Pharmaceutical Industry," Working Papers ECARES 2020-49, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/315066
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    References listed on IDEAS

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    Cited by:

    1. Gugler, Klaus & Szücs, Florian, 2023. "Market Power and Regulation in Pharmaceutical Markets," Department of Economics Working Paper Series 343, WU Vienna University of Economics and Business.
    2. Rabbani, Maysam, 2021. "Mergers with Future Rivals Can Boost Prices, Intensify Market Concentration, and Bar Entry," MPRA Paper 112864, University Library of Munich, Germany, revised 26 Apr 2022.
    3. Rabbani, Maysam, 2023. "Mergers with future rivals can boost prices, bar entry, and intensify market concentration," International Journal of Industrial Organization, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    market definition; competition policy; antitrust; pharmaceutical industry;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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