Evaluation of downstream integration in the US pharmaceutical industry

Abstract

Purpose

This paper aims to review the vertical or quasi‐vertical integration that characterized the pharmaceutical industry in the mid‐1990s. The acquisitions and vertical partnerships that linked pharmacy benefits managers and drug manufacturers modified the structure of the market at that time. What were the motivations of those agreements? Did they induce any distortion on competition in the drug market? And why did they fail to achieve their desired strategic advantages?

Design/methodology/approach

The paper uses established theoretical perspectives, such as the resource‐based view and the theory of contestable markets, as the basis for a descriptive analysis, documenting strategic decisions of vertical integration using supporting literature in marketing and strategy.

Findings

Vertical integration did not obtain the intended results (e.g. acquisition of competitive advantages). This perspective provides a framework to examine vertical integration strategies, applicable to other industries.

Originality/value

The paper reviews the objectives of vertical integration strategies of US drug firms in the 1990s and their hidden agendas.

Citation

Simonet, D. (2007), "Evaluation of downstream integration in the US pharmaceutical industry", International Journal of Pharmaceutical and Healthcare Marketing, Vol. 1 No. 2, pp. 143-158. https://doi.org/10.1108/17506120710762997