Joan-Ramon Borrell

Assessing excess profits from different entry regulations

Entry regulations affecting professional services such as pharmacies are common practice in many European countries. We assess the impact of entry regulations on profits estimating a structural model of entry using the information provided by a policy experiment. We use the case of different regional policies governing the opening of new pharmacies in Spain to show that structural models of entry ought to be estimated with data from policy experiments to pin down how entry regulations change payoffs functions of the incumbents. Contrary to the public interest rationales, regulations are not boosting only small town pharmacies payoffs nor increasing all pharmacies payoffs alike. The gains from regulations are very unevenly distributed,suggesting that private interests are shaping the current mix of entry and markup regulations.

Evaluating Antitrust Leniency Programs

This paper identifies and then quantifies econometrically the impact of leniency programs on the perception of the effectiveness of antitrust policies using country level panel data for a 10-year span. Leniency programs have been introduced gradually in antitrust legislation across the globe to fight more effectively against cartels. We use the dynamics of the diffusion of such policy innovation across countries and over time to evaluate the impact of the program. We find that leniency programs have had a significant impact on the perception among the business community of the effectiveness of each country‟s antitrust policy. Leniency programs have become weapons of mass dissuasion in the hands of antitrust enforcers against the more damaging forms of explicit collusion among rival firms in the market place.

Pharmaceutical Price Regulation A Study on the Impact of the Rate-of-Return Regulation in the UK

AbstractObjective: This work carries out an empirical evaluation of the impact of the main mechanism for regulating the prices of medicines in the UK [the Pharmaceutical Price Regulation Scheme (PPRS)] on a variety of pharmaceutical price indices. The article also discusses to what extent the rate-of-return (ROR) regulation has encouraged UK-based pharmaceutical firms with patented products to diversify into markets in which products face strong competition. Design and setting: The article starts with some background on the PPRS and the way firms behave under ROR constraints. The article goes on to explain the cointegration methods used and the results obtained. Finally, it offers some discussion and some conclusions related to the evidence and the incentives of UK pharmaceutical firms under the PPRS constraint. Main outcome measures and results: The results obtained show that, according to only some cointegration tests carried out, the aggregate price indices of medical preparations and the price index of some therapeutic areas are cointegrated with the time series of ROR caps between 1980 and 1994. Additionally, a 1% change in the ROR cap has produced only a 0.15% change on the aggregate medicine price index. Conclusions: These results suggest that changes in the ROR cap have had little or no impact on medicine prices and that, at best, the impact of the ROR has also differed significantly across major therapeutic areas. Finally, it is argues that the UK regulation of prices might have encouraged firms to diversify into competitive medicine-regulated markets and into uncontrolled markets.

Driving competition in local gasoline markets

Relevant market definition is still a key element of economic analysis of competition in the gasoline market. It is particularly difficult to handle when competition is local and market power is geographically constrained like is the case in the gasoline market. We analyse how the application of the hypothetical monopolist or Small but Significant Non-Transitory Increase in Prices (SSNIP) test performs for defining isochrones using only information on prices and distance among competitors. We conclude that geographic information systems can be very successfully used to define more precisely relevant geographic market in the gasoline retailing. The application to the Spanish gasoline market concludes that geographic relevant market is composed by 5-6 minutes of travel time. Localised market power should be taken into account when analysing the adverse effects of mergers and entry regulations in gasoline retailing. Only drawing small enough isochrones will drive competition in local markets because it is just close rivals that compete effectively with each other.

Clustering or Scattering: The Underlying Reason for Regulating Distance Among Retail Outlets

Concerns on the clustering of retail industries and professional services in main streets had traditionally been the public interest rationale for supporting distance regulations. Although many geographic restrictions have been suppressed, deregulation has hinged mostly upon the theory results on the natural tendency of outlets to differentiate spatially. Empirical evidence has so far offered mixed results. Using the case of deregulation of pharmacy establishment in a region of Spain, we empirically show how pharmacy locations scatter, and that there is not rationale for distance regulation apart from the underlying private interest of very few incumbents.

Pricing and patents of HIV/AIDS drugs in developing countries

This article provides empirical evidence on the impact of patents on drug prices across developing countries. It uses sales data on human immunodeficiency virus (HIV)/acquired immuno deficiency syndrome (AIDS) drugs in a sample of 34 low- and middle-income countries between 1995 and mid-2000. The main findings are that patents do shift drug prices up, drug prices are correlated to per capita income levels and drug firms follow a skimming strategy when pricing new HIV/AIDS drugs. That is, there is across country and intertemporal price discrimination in the global drug markets.

Drug Price Differentials Caused by Formularies and Price Caps

This paper analyses the behaviour of drug firms facing the threat of having their drugs excluded from the formulary of health care providers. The paper obtains two main results. One is that drug firms offer discounts to health care providers to avoid going off-list when competing in a free-entry monopolistically competitive setting, and that discounts obtained by health care providers do not cause prices to rise outside managed care. The second result is that price caps affect how prices evolve over time. Drug firms set higher introductory prices, but raise these less dramatically over time, when health care providers find it increasingly difficult to off-list older drugs.

Patents and the faster introduction of new drugs in developing countries

This paper finds that product patent regimes spur faster introduction of new HIV/AIDS drugs only in those developing countries with relatively equally distributed incomes.

Fashioning Antitrust Regimes: One Legal Rule Does Not Fit All

Countries differ in the rule used for adjudicating antitrust cases. Some consider per se illegal some business practices while others use the rule of reason to outlaw them in a case by case basis. And, countries sometimes use different criteria to adjudicate cases in different policy domains. In the US, avert collusion is per se illegal, while it used to be adjudicated using the rule of reason in the EU and most European jurisdictions. By contrast, Europe was prone to use a per se illegality rule when adjudicating the use of exclusionary practices by dominant firms, while similar monopolization cases are judged using the rule of reason in the US. This paper shows that neither per se illegality nor the rule of reason fits all countries and policy domains. Effectiveness of antitrust enforcement is maximized when the legal standard is fashioned to take into account the effect of adjudicating rules on the conduct of firms and its impact on the likelihood of causing harm. The per se illegality rule is more efficient than the rule of reason to deter firms to collude in large markets and to deter dominant position abuses in small markets.

The European Commission's Fight against Cartels (1962-2014): A Retrospective and Forensic Analysis: An analysis of the EC's fight against cartels

On the basis of information collected from all the published European Commissions decisions in cartel cases between 1962 and 2014, this paper identifies different stages in the supra†nationalization of cartel policy at the European Union (EU) level. It analyzes major competition policy reforms, strategies and initiatives taken by the European Commission (EC), and its relationship and interaction with Member States’ resistance and other policy players’ positions, which offers a new in†depth study on the history and political economy of a key pillar of EU integration. It also provides a forensic analysis of the sanctioned cartels at each stage. This study shows that the introduction of the leniency programme was a critical juncture that allowed cartel authorities to identify cartels more effectively and to provide evidence for sanctioning collusion much more easily than before. This success was a key determinant for deepening the EU integration in competition policy. The intended drivers and the paradoxically unexpected shifters of such growing integration in cartel policy enforcement at the EU are discussed.