Some of the various forms of abuse are: price fixing, imposing discriminatory price, predatory pricing, limiting supply of goods or services, denial of market access, etc. It is a way of interfering with competition in the market place. Abuse of dominance occurs when a firm in a dominant position engages in practices that are aimed at stifling the level of competition
Nowadays it seems like legal drugs are more expensive than illegal ones. This dilemma occurs because the pharmaceutical industry affects the economy significantly. Although the United States is a mixed market economy, there are instances where the economy seems like a free market economy. A free market economy allows companies to determine the prices of goods free from government intervention. The pharmaceutical industry, despite several regulations set by the food and drug administration, is a free market economy.
Governments throughout the world intervene in the health sector. It is hardly for any economic activity to be free from the government intervention. In Malaysia, the government intervention shown in the three main categories, including provision of goods and services, redistribution and regulation under the dominant scopes of financing, production or delivery as well as regulation of healthcare industries (Folland, Goodman, & Stano, 2010). Undeniably, there are many factors could motivate intervention in healthcare by the government such as equity, efficiency and monopoly power. It is true that all these factors are arises due to the existence of market failure which acts as an economic rationale for government intervention.
Pharmaceutical products require various types of organic chemical. There are a number of chemical suppliers present in the market. Instead of buying chemicals at the high cost, pharma companies can switch from one company to other. For specific APIs where the sourcing of raw materials is difficult, suppliers have a higher bargaining power but since most raw materials are easily available and suppliers are numerous, where one can easily replace the other, their bargaining power is low. " Bargaining power of buyer: The buyer's bargaining power is moderate.
Austin’s particular theory of law is often called the “command theory of law” because the concept of command lies at its core: law is the command of the sovereign, backed by a threat of sanction in the event of non-compliance. He distinguished positive law from positive morality which is devoid any legal sanction. In his own words, “the existence of law is one thing, its merit and demerit is another...A law which actually exists, is a law, though we happen to dislike it or though it may vary from the text by which we regulate our approbation or disapprobation
The agreement so entered by the competitors must have an appreciable effect on the market so as to qualify itself for being restricted by the competition law. Some of the parameters to judge the effect of the agreement on the market are as follows: • The aggregate of business that is being controlled by the competitors. • The remaining strength of the
Porter’s 5 Forces: Entry Barriers: Now we will attempt to find out, what are the entry barriers and attractiveness of the Pharmaceutical industry in order to understand, if the industry is giving enough perks to the new entrants or is not really fruitful. We have considered some barriers and opportunities that would tell us, how the industry is behaving. • Product differentiation (like Patents, licensing agreements and selective access to natural resources) gives competitive advantage to the existing manufacturers, which new entrants might not have. • High government regulations (like minimum standard of quality, Pricing, import and exports, specific requirements for factory premises and materials, plants and equipments etc) also act as barriers
Criticism: Lazonick (1993) took up the challenge with porter regarding the issues of rivalry, issues regarding rivalry alone cannot pressure firm to produce more innovative products. When a firms faces too many issues from their competitors, they may rather choose to imitate their competitors’ products than innovate products at their own risk. When foreign competitors come up to take challenges with firms, firms would rather choose to be cooperative the business with their current competitors to prevent decline of products. Porter’s diamond framework concept most of the time focuses on the home based market due to competitiveness of a national business system is usually derive from their home based market (Porter, 1990). Single diamond framework
Intellectuaal Property, Antitrust and Cumulative Innovation in the EU and the US. Cornwall, Hart Publishing Ltd 2012, p 108-109.] This was later (in 2012) confirmed in the European Court of Justice. The case was the first in the pharmaceutical sector, to include restrictions of competition by the originator via delaying generic entry to the market. Therefore it was highly influential to the way companies structured their strategies to protect their brands after patent expiry.
The government should also interfere: They should regulate the information that these pharmaceutical company’s provide to doctors. Also making certain “gifts” illegal. Under no circumstances should a pharmaceutical representative be allowed to make contact with doctors without their consent. The most important law I would suggest is making a quota of percentage of which is maximally allowed to be invested in marketing and a minimal for research and development. In a time of hacking the cloud, declare scandals and bank bonuses, doctors have a chance to make their position as the most trusted professional, and deliberately distance themselves from the temptations of the pharmaceutical industry.