2 Jun 2022


Competition in Healthcare Industry

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A competitive market is a market in which a large number of sellers or producers compete with each other to provide maximum satisfaction to the needs and wants of a large number of customers (Stigler, 2008). In an economic competition, no single manufacturer or a group of producers, and no single buyer or a group of buyers can dictate prices of the goods or services or rather how the market will operate. Through competition, customers can obtain quality products as the producers invest much in improving their products to attract more customers. Additionally, through competition, products’ prices are in check. Economic competition is determined by the industry as some industries are more competitive than others. 

Unfortunately, healthcare is not one of the industries with stiff competition. This market has inhibited competition, which makes it provide average quality of care and raise prices more often than expected. First, in the healthcare market, there exist lack of price transparency which makes customers have the inability to choose healthcare providers based on their prices. Secondly, customer choice for the insurance provider is mostly dictated by employers or the state law which make them lack the freedom in obtaining health care services. Thirdly, hospitals are limited in number especially in rural areas. This scarcity of healthcare providers makes customers lack alternatives but visit the nearest healthcare centers. The level of competition in healthcare industry varies from one country to another. 

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One of the recent acquisitions in healthcare is between Gilead Sciences and Kite Pharm. Gilead Sciences Inc. is a biopharmaceutical organization whose operations involve researching, developing and commercializing drugs. Contrary, Kite Pharm is a California based healthcare organization that mostly deals with the treatment of tumor and development of cancer immunotherapy products. On 28th August 2017, Gilead Acquired Kite Pharm to extend its services and attract more customers (Wire, October 3, 2017). The main cause of increased cases of mergers and acquisition in healthcare is for the pursuance of economies of scale which leads to the decreased cost of production thus increasing profits (Deloitte, 2017). Other healthcare organizations merge to improve their influence in the market by competing with their fierce competitors. 

Healthcare companies are important organizations as there is a huge public interest in their success. As many mergers and acquisitions have been reported failing, the government must come in to protect the interest of the public. The government should evaluate the aim of the mergers or acquisitions as most managers want them to build an empire and not to increase the gains obtained by stakeholders (McCarthy, March 24, 2017). Through the legal system, the government should ensure that the mergers and acquisitions it does oversee have a positive impact on the national economy. The government should also ensure that these processes are undertaken using the right legal procedures. 


Deloitte. (2017). Hospital mergers and acquisitions: An Analysis. https://www2.deloitte.com/us/en.html&hl=en-KE&tk=9348161652094022734&geid=1027. 

McCarthy, K. (March 24, 2017). Mergers and Acquisitions: Does the Government have a role to play? Faculty of Economics and Business Blog: University of Groningen , https://www.rug.nl/feb/blog/blog-24-03-2017-mergers-and-acquisitions-does-the-government-have-a-role-to-play?lang%3Den&hl=en-KE&geid=1027. 

Stigler, G. J. (2008). "Competition" The New Palgrave Dictionary of Economics. Abstract . 

Wire, B. (October 3, 2017). Gilead Sciences Completes Acquisition of Kite Pharma, Inc. Bisiness Wire , https://www.google.com/amp/s/www.yahoo.com/amphtml/finance/news/gilead-sciences-completes-acquisition-kite-124500940.html. 

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StudyBounty. (2023, September 15). Competition in Healthcare Industry.


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