Price Regulation, Industry Structure and Innovation

Summary

The home competitive environment has a powerful effect on companies — shaping skills, strategies, and performance outside the home environment. Government industrial policies, such as pharmaceutical pricing regulations, affect companies primarily through shaping the nature of the home environment. Successful competitive environments (such as the UK) exhibit higher average drug prices and an internal structure of prices that favour significant innovators, discourage minor products, and provide a shield against foreign competitors. Poor competitive environments (such as France) exhibit low average prices and an internal price structure that favours weak local companies producing imitative or minor products.