An Analysis and Discussion of Joint Venture and Cooperation within the High Entry Cost Market of Biotech and Pharmaceuticals

As a means of better understanding joint ventures and the motivations behind them, the following discussion will be concentric upon defining and discussing the ways in which joint ventures within the biotech and pharmaceutical field can be explained as ultimately rational business choices that are determined based upon ability to engage with the market, success ratios, and potential future profitability.
As a guiding entity of the process, the legal departments of the requisite entities must be continually engaged and aware of the process. This represents an added cost and necessity that each and every pharmaceutical firm engaged in research and development must necessarily incorporate a team of legal experts and lawyers to guide them through each and every process of clinical trials, reporting requirements, paperwork, and associated compliance issues. Ultimately, economic theory dictates that that price discrimination corresponds to the following three market conditions: the power of market sellers, the segmentation and overall price responsiveness of the market, and the direct and indirect potential that exists for arbitrage. With respect to market power, this is a concept which can simply be understood as a function of the ability of the seller to raise its prices as compared to the other sellers that exist within the market. Obviously, in the case of a brand name drug that has recently been cleared by clinical trials and is available to the marketplace, the ability of the seller to raise his/her prices above that of the competition is very high due to the fact that no perfect substitute exists and there is a near perfect monopoly engaged by the given pharmaceutical manufacturer. albeit for a limited amount of time (Gupta et al 2011).