Abstract
Within a free market economy, the ‘invisible hand of the price mechanism’ operates such that suppliers allocate resources in response to consumer demand. However, where a market is distorted, prices can have adverse effects on welfare and efficiency, and government intervention is required to reduce the potential for exploitation by sellers (or buyers) by regulating how goods, services and labour are used, priced or distributed. This is the case for monopolistic suppliers of patent-protected, branded medicines, operating within monopsonistic health service providers such as the UK NHS. The Pharmaceutical Price Regulation Scheme (PPRS) was established not long after the NHS itself and has the explicit aim of ensuring ‘‘that the interests of patients, the NHS, the industry and the taxpayer
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