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Generic Competition in the US Pharmaceutical Industry

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  • Atanu Saha
  • Henry Grabowski
  • Howard Birnbaum
  • Paul Greenberg
  • Oded Bizan
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    Abstract

    We develop a simultaneous equations estimation framework to understand the interactions among generic entry, prices, and market shares. We base our estimates on a panel data sample of 40 brand-name drugs that first experienced generic competition during the period July 1992-January 1998. We find that generic share and price are simultaneously determined, while the number of generic entrants is a key determinant of generic market share and the generic-to-brand price ratio. In addition, we find generic competition to be particularly intense for blockbuster drugs, which experience significantly more generic entrants, price erosion, and generic penetration than other drugs.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

    Volume (Year): 13 (2006)
    Issue (Month): 1 ()
    Pages: 15-38

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    Handle: RePEc:taf:ijecbs:v:13:y:2006:i:1:p:15-38

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    Web page: http://www.tandfonline.com/CIJB20

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    Related research

    Keywords: Generic Entry; Competition; JEL Classifications: I11; L11;

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    References

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    1. Hudson, John, 2000. "Generic take-up in the pharmaceutical market following patent expiry: A multi-country study," International Review of Law and Economics, Elsevier, Elsevier, vol. 20(2), pages 205-221, June.
    2. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 421-440, December.
    3. Meir Statman, 1981. "The effect of patent expiration on the market position of drugs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 2(2), pages 61-66, 06.
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    Citations

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    Cited by:
    1. Roger Feldman & Félix Lobo, 2013. "Competition in prescription drug markets: the roles of trademarks, advertising, and generic names," The European Journal of Health Economics, Springer, Springer, vol. 14(4), pages 667-675, August.
    2. Iván Moreno-Torres & Jaume Puig-Junoy & Joan-Ramon Borrell, 2009. "Generic Entry into the Regulated Spanish Pharmaceutical Market," Review of Industrial Organization, Springer, Springer, vol. 34(4), pages 373-388, June.
    3. Appelt, Silvia, 2010. "Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry," Discussion Papers in Economics 11476, University of Munich, Department of Economics.
    4. Lee G. Branstetter & Chirantan Chatterjee & Matthew Higgins, 2011. "Regulation and Welfare: Evidence from Paragraph IV Generic Entry in the Pharmaceutical Industry," NBER Working Papers 17188, National Bureau of Economic Research, Inc.
    5. Brekke, Kurt R. & Holmas, Tor Helge & Straume, Odd Rune, 2011. "Reference pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 95(7), pages 624-638.
    6. Joan Costa-i-Font & Nebibe Varol & Alistair McGuire, 2011. "Does pharmaceutical price regulation affect the adoption of generic competition?: evidence from the OECD, 1999-2008," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 37537, London School of Economics and Political Science, LSE Library.
    7. Liu, Ya-Ming & Yang, Yea-Huei Kao & Hsieh, Chee-Ruey, 2012. "Regulation and competition in the Taiwanese pharmaceutical market under national health insurance," Journal of Health Economics, Elsevier, vol. 31(3), pages 471-483.
    8. Yi-Wen Tsai & Yu-Wen Wen & Weng-Foung Huang & Ken Kuo & Pei-Fen Chen & Hsin-Wei Shih & Yue-Chune Lee, 2010. "Pharmaceutical penetration of new drug and pharmaceutical market structure in Taiwan: hospital-level prescription of thiazolidinediones for diabetes," The European Journal of Health Economics, Springer, Springer, vol. 11(3), pages 279-290, June.
    9. Liu, Ya-Ming & Cheng, Jur-Shan, 2012. "Determinants of generic entry in the regulated Taiwanese prescription drug market," Health Policy, Elsevier, vol. 108(2), pages 228-235.
    10. Patricia M. Danzon & Michael F. Furukawa, 2011. "Cross-National Evidence on Generic Pharmaceuticals: Pharmacy vs. Physician-Driven Markets," NBER Working Papers 17226, National Bureau of Economic Research, Inc.

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