An Outline of the Market Structure of the Pharmaceutical Industry

Economics for Business
Plymouth University


Date Submitted: February 22nd 2012

Executive summary

An outline of the market structure of the pharmaceutical industry

To achieve this, research was undertaken into what goods/services are produced and how the market share is split up between the firms. What follows is an analysis of how the major firms behaved in the industry- using prediction of behavior from economic theory.  

The pharmaceutical industry market structure is an oligopoly. The firms in the industry don’t compete on price instead they product differentiate as predicted by the kinked demand curve theory.


The pharmaceutical industry is one of the largest markets worldwide. The aim of this project is to identify the market structure of the pharmaceutical industry and to apply economic theory to this industry.

This report presents what good and services are produced in the pharmaceutical industry, what market structure and predictions economic theory make about the pharmaceutical firms’ behaviour in the industry. Also evaluating the economic theories’ predictions with examples will highlight the accuracy of these theories in practice.

Part one: What goods or services are produced by this industry?
The products within this industry vary significantly; with medication ranging from the common cold to ones that are able to cure life threatening illnesses such as cancer and HIV. Glaxosmithkline, the UK’s largest pharmaceutical company specifically invests in prescription drugs and consumer health care. The health care products can range from workout recovery products such as Lucozade to dental products such as Sensodyne. Money is also significantly invested into research and development of surgical and medical aids. Recent statics have shown significant increases in...