Market Definition and Competition Policy Enforcement in the Pharmaceutical Industry
36 Pages Posted: 7 Oct 2019 Last revised: 18 Oct 2019
Date Written: October 2019
We focus on market definition in the pharmaceutical industry, where the introduction of generics in different markets provide a sequence of quasi natural experiments involving a significant competitive shock for the molecule experiencing Loss of Exclusivity. We show that generic entry alters competitive constraints and generates market-wide effects. Paradoxically, entry may soften competitive pressure for some originators. We obtain these results by econometrically estimating time-varying price elasticities and apply the logic of the Hypothetical Monopolist Test to delineate antitrust markets. They provide strong empirical support to the approach consisting in defining relevant markets contingent on the theory of harm. We discuss the relevance of these findings in the context of ongoing cases.
JEL Classification: D22, I11, L22
Suggested Citation: Suggested Citation