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Can branded drugs benefit from generic entry? The role of detailing and price in switching to non-bioequivalent molecules

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  • Gonzalez, Jorge
  • Sismeiro, Catarina
  • Dutta, Shantanu
  • Stern, Philip

Abstract

Patent expiration represents a turning point not only for the brand losing patent protection, as bioequivalent generic versions of the drug quickly enter the market at reduced prices, but also for the non-bioequivalent drugs that retain patent protection in the same therapeutic category. In this paper, we study how physician characteristics and prescribing decisions impact competition among molecules of a therapeutic class once generic versions of one of these molecules enter the market. Our results show that the traditional focus on the single molecule losing patent protection is not sufficient to understand the impact of generics in the category and their cost-saving potential. We find that generic entry in the category under analysis not only leads to the expected decrease in the prescription of the branded molecule bioequivalent to the generics, but also unexpectedly benefits other non-bioequivalent branded drugs as detailing-sensitive physicians switched from the contested molecule to these other branded alternatives. However, a group of price-sensitive physicians did increase their use of the new generics to the detriment of all branded alternatives, allowing for additional savings in health care costs. The overall market result is a slight decrease in the prescriptions of the now much cheaper molecule. This paradox was identified previously in several pharmaceutical categories [Caves, R.E., Whinston, M.D., & Hurwitz, M.A. (1992), “Patent expiration, entry and competition in the US pharmaceutical industry: An exploratory analysis”, Brookings Papers on Economic Activity, Microeconomics, vol. 1991, 1–48.], but lacked a systematic understanding and explanation. We show that the understanding of such market paradoxes requires marketers and policy makers to (1) determine the size of physician segments sensitive to marketing activity and prices, and (2) assess the marketing activity of all pharmaceutical firms, whether bioequivalent or not. We discuss the managerial and policy implications of our results.

Suggested Citation

  • Gonzalez, Jorge & Sismeiro, Catarina & Dutta, Shantanu & Stern, Philip, 2008. "Can branded drugs benefit from generic entry? The role of detailing and price in switching to non-bioequivalent molecules," International Journal of Research in Marketing, Elsevier, vol. 25(4), pages 247-260.
    • Handle: RePEc:eee:ijrema:v:25:y:2008:i:4:p:247-260
    DOI: 10.1016/j.ijresmar.2008.08.002
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    Cited by:

    1. Porath, Daniel, 2016. "Size and dynamics of order-of-entry effects in pharmaceutical markets," UASM Discussion Paper Series 4/2016, University of Applied Sciences Mainz.
    2. Nikolopoulos, Konstantinos & Buxton, Samantha & Khammash, Marwan & Stern, Philip, 2016. "Forecasting branded and generic pharmaceuticals," International Journal of Forecasting, Elsevier, vol. 32(2), pages 344-357.
    3. Sismeiro, Catarina & Mizik, Natalie & Bucklin, Randolph E., 2012. "Modeling coexisting business scenarios with time-series panel data: A dynamics-based segmentation approach," International Journal of Research in Marketing, Elsevier, vol. 29(2), pages 134-147.
    4. Katharina Elisabeth Fischer & Tom Stargardt, 2016. "The diffusion of generics after patent expiry in Germany," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(8), pages 1027-1040, November.
    5. Holtrop, Niels & Wieringa, Jakob & Gijsenberg, Maarten & Stern, P., 2016. "Competitive reactions to personal selling," Research Report 16004-MARK, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    6. Peter Leeflang & Jaap Wieringa, 2010. "Modeling the effects of pharmaceutical marketing," Marketing Letters, Springer, vol. 21(2), pages 121-133, June.
    7. Siotis, Georges & Castanheira, Micael & de Frutos, Maria-Angeles & Ornaghi, Carmine, 2017. "The Unexpected Consequences of Asymmetric Competition. An Application to Big Pharma," CEPR Discussion Papers 11813, C.E.P.R. Discussion Papers.
    8. S. Buxton & Kostas Nikolopoulos & M. Khammash & P. Stern, 2015. "Modelling and Forecasting Branded and Generic Pharmaceutical Life Cycles: Assessment of the Number of Dispensed Units," Working Papers 15004, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    9. Stremersch, Stefan, 2008. "Health and marketing: The emergence of a new field of research," International Journal of Research in Marketing, Elsevier, vol. 25(4), pages 229-233.

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