Evolving market boundaries and competition policy enforcement in the pharmaceutical industry
Evolving market boundaries and competition policy enforcement in the pharmaceutical industry
Competition investigations start with market definition, which establishes the perimeter of the competitive analysis. In this paper, we focus on the definition of economic markets in the pharmaceutical industry, where the entry of generics in different therapeutic areas provides a sequence of quasi-natural experiments involving a significant competitive shock for the originator producer. We show how generic entry modifies price and non-price competitive constraints over time, generating market-wide effects. Paradoxically, generic entry may soften the competitive pressure for brands other than the originator. We obtain these results by econometrically estimating time-varying price elasticities. We then apply the logic of the Hypothetical Monopolist Test to gauge the strength of competitive constraints under different market structures. Our results provide strong empirical support for an approach that defines relevant markets contingent on the theory of harm. We discuss the relevance of these findings in the context of ongoing cases.
Antitrust, Competition policy, Market definition, Pharmaceutical industry
313-348
Ornaghi, Carmine
33275e47-4642-4023-a195-39c91d0146b0
Siotis, Georges
3de229c7-c594-4ed9-8da4-24ad57646695
Castanheira, Micael
ee506361-6cac-43df-bb2b-e008bc490254
1 April 2023
Ornaghi, Carmine
33275e47-4642-4023-a195-39c91d0146b0
Siotis, Georges
3de229c7-c594-4ed9-8da4-24ad57646695
Castanheira, Micael
ee506361-6cac-43df-bb2b-e008bc490254
Ornaghi, Carmine, Siotis, Georges and Castanheira, Micael
(2023)
Evolving market boundaries and competition policy enforcement in the pharmaceutical industry.
European Journal of Law and Economics, 55 (2), .
(doi:10.1007/s10657-022-09760-7).
Abstract
Competition investigations start with market definition, which establishes the perimeter of the competitive analysis. In this paper, we focus on the definition of economic markets in the pharmaceutical industry, where the entry of generics in different therapeutic areas provides a sequence of quasi-natural experiments involving a significant competitive shock for the originator producer. We show how generic entry modifies price and non-price competitive constraints over time, generating market-wide effects. Paradoxically, generic entry may soften the competitive pressure for brands other than the originator. We obtain these results by econometrically estimating time-varying price elasticities. We then apply the logic of the Hypothetical Monopolist Test to gauge the strength of competitive constraints under different market structures. Our results provide strong empirical support for an approach that defines relevant markets contingent on the theory of harm. We discuss the relevance of these findings in the context of ongoing cases.
Text
s10657-022-09760-7
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Accepted/In Press date: 13 December 2022
e-pub ahead of print date: 9 February 2023
Published date: 1 April 2023
Keywords:
Antitrust, Competition policy, Market definition, Pharmaceutical industry
Identifiers
Local EPrints ID: 475304
URI: http://eprints.soton.ac.uk/id/eprint/475304
ISSN: 0929-1261
PURE UUID: 71f8d84d-14b9-40bf-94ab-04e2f0eeafc1
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Date deposited: 15 Mar 2023 17:32
Last modified: 17 Mar 2024 03:00
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Contributors
Author:
Georges Siotis
Author:
Micael Castanheira
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