FIRM BEHAVIOR IN THE UNITED-STATES MARKET FOR FACTOR-VIII - A NEED FOR POLICY

In this paper, we historically examine the market for Factor VIII conc entrate, a collection of blood products used in the treatment of hemop hilia A. With the introduction of HIV-1 into the U.S. blood supply, a majority of American hemophiliacs became infected with the virus. In r esponse to contamination, the pharmaceutical manufacturers producing F actor VIII concentrate developed highly purified products which were i ntroduced in the late 1980s at four to five times the price of the old er, intermediate purity products. These new products are highly valuab le in protecting the 30% of hemophiliacs who are HIV-1 seronegative; h owever, for those individuals previously infected by the virus, the ex tra benefit of the more costly products was questionable at the time t hey were first introduced. We postulate that there has been some level of industry coordination among the producers of Factor VIII concentra tes to supply only the more expensive, highly purified products even t hough there appeared to be significant demand for the intermediate pur ity products by HIV-1 infected hemophiliacs. We develop and present a model that is useful for testing an inter-product collusion hypothesis . Further, we hypothetically discuss the model's implications and deve lop some public health policy options that might improve the competiti ve performance of the market.