High barriers to entry must be keeping competitors from providing alternatives to off-patent generic drugs. What could be the source of these barriers to entry?
It isn’t the lack of know how. Many firms are able to produce chemicals, even specialized chemicals in the life sciences. And, that is what a drug is: it is a chemical. As observed in animal health care, agricultural chemistry and many other specialty chemical companies: competition keeps prices relatively low. Yet, in human life sciences, there is insufficient competition.

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Clear communication about surge pricing is good customer service but without conveying its benefits, Uber is increasing the price sensitivity of its riders. This is a well-known effect of overemphasizing price in marketing communications. But price is only one reason that customers choose Uber. Why not focus on the benefits of surge pricing?

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Getting back to the shop-floor example: what if you realized that you ended up buying a few million dollar worth machinery but had to retain the workforce to run the machines as per requirements? In fact you ended up renting a bigger floor to accommodate the humans and machines?

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