Technology, Regulation, and Market Structure in the Modern Pharmaceutical Industry

This paper describes the transformation of the American pharmaceutical industry into its modern configuration in the 1950s. The industry was faced with new regulatory and technological conditions which changed both the way drugs were marketed and what drugs were marketed. The new conditions led to substantially larger drug firms and increased vertical integration, but not to increased concentration or relative profitability in the drug industry. The reasons for this pattern of development stem from the interaction among the FDA's regulations on drug marketing, the limits of patent protection, and the nature of the new technology.