So what about the IO of the brand name sector? There's a New York Times piece on it here which suggests that you could use it to teach Coase's question on the nature of the firm. To paraphrase, since economic theory teaches that production and exchange can be coordinated through the price mechanism, why do firms, especially big, vertically-integrated firms exist at all?
The usual answer is transactions costs. There is something intrinsic to a sector which prevents the price mechanism from working its magic (I'd say something about preventing the Invisible Hand from working, but I don't want to wind up on one of Gavin Kennedy's Looney Tunes lists) and which requires direct, command-and-control assignment of resources to tasks.
So the structure of a particular sector, whether it be made up of a few large vertically integrated firms (as the auto industry is now) or of a lot of smaller firms which sell parts to each other and to final assemblers (as the auto industry was before Henry Ford created the modern auto firm) is going to vary across sectors according to the nature of the transactions cost in each sector.
But the research-based pharmaceutical sector has both extremes. You've got the traditional Big Pharma integrated firms which do everything from basic research through production and marketing, and you've got small specialist companies, some of them doing basic research, others buying the products of the first firms and bringing them to market, and you've got CROs, Contract Research Organizations, which specialize in running clinical trials for firms which are hoping to bring drugs to market. And the structure isn't static - it's a wheel which is always turning; sometimes being small and nimble is the way of the future ans sometimes being large and having a portfolio of drugs and drug candidates which can see you through bad times is the only way to survive (according to that year's favoured theory).
So the research based pharmaceutical sector is one in which Coase's firm structures are in a constant state of churn. Which has got to mean something really cool as far as the industry's Coasean transactions costs are concerned.
