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Generic Entry and the Pricing of Pharmaceuticals

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Author Info
Richard G. Frank
David S. Salkever
Abstract

During the 1980s the share of prescriptions sold by retail pharmacies that was accounted for by generic products roughly doubled. The price response to generic entry of brand-name products has been a source of controversy. In this paper we estimate models of price responses to generic entry in the market for brand-name and generic drugs. We study a sample of 32 drugs that lost patent protection during the early to mid-1980s. Our results provide evidence that brand-name prices increase after generic entry and are accompanied by large decreases in the price of generic drugs. Copyright (c) 1997 Massachusetts Institute of Technology.

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Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 6 (1997)
Issue (Month): 1 (03)
Pages: 75-90
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Handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:75-90

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  1. Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2003. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," NBER Working Papers 10159, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Ville Aalto-Setälä, 2008. "The impact of generic substitution on price competition in Finland," The European Journal of Health Economics, Springer, vol. 9(2), pages 185-191, May. [Downloadable!] (restricted)
  3. Henry G. Grabowski & David B. Ridley & Kevin A. Schulman, 2007. "Entry and competition in generic biologics," Health Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 439-451. [Downloadable!]
  4. Niklas Rudholm, 2003. "Competition and substitutability in the Swedish pharmaceuticals market," Applied Economics, Taylor and Francis Journals, vol. 35(14), pages 1609-1617, September. [Downloadable!] (restricted)
  5. Mark Duggan & Fiona Scott Morton, 2004. "The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing," NBER Working Papers 10930, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Anna Merino, 2000. "The Impact of the Reference Price System on the Pharmaceutical Market: A Theoretical Approach," Working Papers, Research Center on Health and Economics 524, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2003. [Downloadable!]
  7. David Reiffen & Michael R. Ward, 2007. "'Branded Generics' as a strategy to limit cannibalization of pharmaceutical markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 251-265. [Downloadable!]
    Other versions:
  8. Antonio Cabrales & Sergi Jiménez-Martín, 2007. "The Determinants of Pricing in Pharmaceuticals: Are U.S. Prices Really Higher than Those of Canada?," UFAE and IAE Working Papers 697.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  9. Antonio Cabrales & Sergi Jiménez-Martín, 2008. "The Determinants of Pricing in Pharmaceuticals: Are U.S. prices really so high?," Working Papers 2008-18, FEDEA. [Downloadable!]
  10. Steven J. Davis & Kevin M. Murphy & Robert H. Topel, 2001. "Entry, Pricing and Product Design in an Initially Monopolized Market," NBER Working Papers 8547, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Jorge Mestre Ferrándiz, 1999. "The impact of generic goods in the pharmaceutical industry," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 599-612.
  12. Granier, L. & Trinquard, S., 2006. "Pseudo-Generic Products and Mergers in Pharmaceutical Markets," Cahiers du LASER (LASER Working Papers) 2006.18, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1. [Downloadable!]
  13. Alka Chadha & Åke Blomqvist, 2005. "Patent Races, “Me-Too” Drugs, and Generics: A Developing-World Perspective," Departmental Working Papers wp0513, National University of Singapore, Department of Economics. [Downloadable!]
  14. Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2003. "The Effects of Extending Intellectual Property Rights Protection to Developing Countries: A Case Study of the Indian Pharmaceutical," Discussion Papers 0304-08, Columbia University, Department of Economics. [Downloadable!]
  15. Granier, L. & Trinquard, S., 2007. "Mergers and Barriers to Entry In Pharmaceutical Markets," Cahiers du LASER (LASER Working Papers) 2007.21, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1. [Downloadable!]
  16. Dalen, Dag Morten & Strøm, Steinar & Haabeth, Tonje, 2005. "Price regulation and generic competition in the pharmaceutical market," Memorandum 33/2005, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  17. Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel Import and the Pricing of Pharmaceutical Products: Evidence from the European Union," Working Paper Series 622, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  18. Gonzalez, Jorge & Sismeiro, Catarina & Dutta, Shantanu & Stern, Philip, 2006. "Market Effects of Generic Entry: The Role of Physicians and of Non-Bioequivalent Competitors," MPRA Paper 3717, University Library of Munich, Germany, revised May 2007. [Downloadable!]
  19. Wen Zhou, 2006. "A Simple Model of Entry That Increases Price Levels and Price Dispersion," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 6(1), pages 1647-1647. [Downloadable!] (restricted)
  20. Henry G. Grabowski & David B. Ridley & Kevin A. Schulman, 2007. "Entry and competition in generic biologics," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 439-451. [Downloadable!]
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