Lecture Health economics - Chapter 11: The pharmaceutical industry. This chapter presents the following content: Competitiveness of the pharmaceutical industry, conduct, performance. | The Pharmaceutical Industry Professor Vivian Ho Health Economics Fall 2009 Outline Competitiveness of the pharmaceutical industry Conduct Performance Benefits of Drugs Reduce mortality Reduce morbidity/improve quality of life Reduce cost of treating diseases Industry Structure # and size distribution of sellers Buyers’ side characteristics Barriers to entry Government regulation Top 10 . Prescription Drug Sellers, 2008 Company Sales $b Pfizer GlaxoSmithKline AstraZeneca Johnson & Johnson Merck & Co Amgen Hoffman-LaRoche (incl Genentech) Novartis Lilly Sanofi-Aventis Article: Merck Intends to Spin Off Unit That Manages Drug Plans All are from the Manufacturing segment of the Economics Census: |315|3162|3251|3254|334611|336111|33712&-geo_id=&-_industry=334611&-_lang=en&-fds_name=EC0200A1 Can competition be accurate measured at the industry level? Most drugs are not substitutes to the patient The relevant product market is the therapeutic market Only a few major drugs compete in most therapeutic markets Concentration ratios at this level are higher than for industry as a whole Express Scripts Drug Trend Report, 2006 *Includes “Generics” as a top-4 firm Firms tend to make most profits from a few key drugs The Buyer Side Expend. Source ($billions) Percent Total All private Out-of-pocket Private insurance All government Federal State Buyers of Prescription Drugs, 2007 NHE: NHE: How 3rd parties influence drug . | The Pharmaceutical Industry Professor Vivian Ho Health Economics Fall 2009 Outline Competitiveness of the pharmaceutical industry Conduct Performance Benefits of Drugs Reduce mortality Reduce morbidity/improve quality of life Reduce cost of treating diseases Industry Structure # and size distribution of sellers Buyers’ side characteristics Barriers to entry Government regulation Top 10 . Prescription Drug Sellers, 2008 Company Sales $b Pfizer GlaxoSmithKline AstraZeneca Johnson & Johnson Merck & Co Amgen Hoffman-LaRoche (incl Genentech) Novartis Lilly Sanofi-Aventis Article: Merck Intends to Spin Off Unit That Manages Drug Plans All are from the Manufacturing segment of the Economics Census: |315|3162|3251|3254|334611|336111|33712&-geo_id=&-_industry=334611&-_lang=en&-fds_name=EC0200A1
