Is pharmaceutical industry an oligopoly or monopolistic competition?
As an oligopolistic multinational the pharmaceutical industry has been identified with high prices and profits, a lack of price competition and heavy product differentiation leading to high concentration ratios.
The pharmaceutical industry is becoming an oligopoly due to the staggering costs of developing and marketing new drugs and because of patents that protect new products from competitors.
Other industries with an oligopoly structure are airlines and pharmaceuticals. Some of the most notable oligopolies in the U.S. are in film and television production, recorded music, wireless carriers, and airlines. Since the 1980s, it has become more common for industries to be dominated by two or three firms.
A monopoly is when a single company produces goods with no close substitute, while an oligopoly is when a small number of relatively large companies produce similar, but slightly different goods. In both cases, significant barriers to entry prevent other enterprises from competing.
Meanwhile, Big Pharma maintains its monopolies and pricing power for decades longer than the 17 years contemplated under current law. The United States needs an effective strategy for maximizing drug innovation and the huge benefits to humanity that it promises.
Drug companies also benefit from patents, which give them monopoly power for their on-patent products. These patents ensure that prices remain high by reducing competition.
The Imperfect Market for Drugs. In the real world, a perfectly competitive market rarely exists. One or more assumptions are violated in most markets and certainly this is the case in the pharmaceutical market.
Once products have been approved for large-scale distribution, Pharmaceutical companies scale-up manufacturing and align themselves with intermediaries to sell the drug through various channels (direct-to-consumer or through distribution channels such as pharmacies and hospitals).
The US pharmaceutical industry is heavily competitive, with nine out of the top ten pharmaceutical companies based in the US. In recent years though, the market has become even more competitive both with branded and generic product segments.
Electricity, railways, and water are examples of the monopoly market. FMCG and automobiles are examples of an oligopoly industry. No competition exists as there is a single seller of the goods. Intense or high competition among the sellers.
Do pharmaceutical companies operate in a market economy?
The pharmaceutical industry is composed of profit-seeking firms like many other industries in a modern market economy.
Natural gas, electricity companies, and other utility companies are examples of natural monopolies. They exist as monopolies because the cost to enter the industry is high and new entrants are unable to provide the same services at lower prices and in quantities comparable to the existing firm.
In practical life, we find monopoly in transport like railways and other public utility services only, but oligopoly exists in many industries of the economy like the automobile industry, telecommunication industry, soft drink industry, plastic industry, etc.
The computer technology sector shows us the best example of oligopoly. If we dig under computer operating softwares, two prominent names come up: Apple and Windows. These two players have managed the majority of the market share.
The government's control over medicines has grown in the last hundred years from literally nothing to far-reaching, and now pharmaceuticals are among the most-regulated products in this country. The two legislative acts that are the main source of the FDA's powers both followed significant tragedies.
pharmaceutical industry, the discovery, development, and manufacture of drugs and medications (pharmaceuticals) by public and private organizations.
Medical Monopoly demonstrates how health care slowly evolved from a social good to a simple market where profit-making naturally matters most. The establishment of health as a market commodity through the slow acceptance of patenting represents a fiercely guarded wealth that continues into this era.
The US pharmaceutical industry is heavily competitive, with nine out of the top ten pharmaceutical companies based in the US. In recent years though, the market has become even more competitive both with branded and generic product segments.
The Imperfect Market for Drugs. In the real world, a perfectly competitive market rarely exists. One or more assumptions are violated in most markets and certainly this is the case in the pharmaceutical market.
The pharmaceutical industry is composed of profit-seeking firms like many other industries in a modern market economy.
What market structure is Pfizer?
Thus, Pfizer is part of the classic oligopoly structure where, "other firms cannot enter the market because either the startup costs are too high" and "the cost structure of the market gives an advantage to the largest firm.
