COMPETITION DYNAMICS IN PHARMACEUTICAL MARKET OF KAZAKHSTAN: THE BUYER POWER CASE

Abstract

Pharmaceutical market and buyer power is an interesting combination that is not well understood and is relatively under-researched. This thesis explores the implications of buyer power for prices of pharmaceutical products by examining the situation in pharmaceutical market of Kazakhstan characterized by presence of a large institutional buyer, relatively relaxed regulatory environment and competition friendly environment on the supply side. The type of buyer power is determined by using analytical framework developed by Dobson et al that distinguishes between monopsony and countervailing power of buyers. The theory states that the large buyer is capable of decreasing prices and as the analytical framework confirmed presence of a large buyer of countervailing type in Kazakhstani pharma-market this hypothesis is tested against this markets reality. In order to complete this mission, the work performs panel data analysis over seven-year period examining the relationship between buyer power and prices for 185 randomly selected pharmaceutical products purchased annually by the institutional buyer. The results only partially support the hypothesis that buyer power leads to lower prices and point to the deficiencies in our understanding of buyer power and to the potentially counterproductive power dynamics in Kazakhstani pharma-market.