Price Competition and the International Pharmaceutical Industry

The issue of the pricing of pharmaceutical products has aroused considerable controversy over the past two decades. Much impassioned debate has ranged around whether the large firms which dominate the industry in developed as well as less-developed countries exercise excessive market power, whether the market power conferred on them legally (by patents) or by commercial practice (advertising of brand names) is abused by charging prices higher than social interest warrants, and what measures (if any) governments should adopt to regulate the pricing and other activities of large firms while maintaining a commercial incentive to invest in innovation.2 The US leads in the public debate on these problems, with the FDA (Food and Drug Administration) vigorously seeking to lower prices of drugs for its health programmes and to diminish the hold that brand names exercise over the choice of drugs. Several European countries have launched comprehensive schemes of price control, while a large number of LDCs are starting on the difficult path of pharmaceutical regulation and reduction in the cost of medicines to the public.(This abstract was borrowed from another version of this item.)