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"Me-Too" Innovation in Pharmaceutical Markets

In: Frontiers in Health Policy Research, volume 12

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  • Anupam B. Jena
  • John E. Calfee
  • Edward C. Mansley
  • Tomas J. Philipson

Abstract

Critics of me-too innovation often argue that follow-on drugs offer little incremental clinical value over existing pioneer products, while at the same time increasing health care costs. We examine whether consumers view follow-on and pioneer drugs as close substitutes or distinct clinical therapies. For five major classes of drugs, we find that large reductions in the price of pioneer molecules after patent expiration—which would typically lead to decreased consumption of strong substitutes—have no effect on the trend in demand for follow-on drugs. Our findings are likely unaffected by health insurance, competitive pricing of me-toos, marketing, and switching costs.

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This chapter was published in:

  • David Cutler & Alan Garber & Dana Goldman, 2009. "Frontiers in Health Policy Research, volume 12," NBER Books, National Bureau of Economic Research, Inc, number cutl08-2.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12340.

    Handle: RePEc:nbr:nberch:12340

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    Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    Cited by:
    1. Rizzo, John & Zeckhauser, Richard Jay, 2012. "Generic Script Share and the Price of Brand-Name Drugs: The Role of Consumer Choice," Scholarly Articles 8057977, Harvard Kennedy School of Government.
    2. Hostenkamp, Gisela, 2013. "Do follow-on therapeutic substitutes induce price competition between hospital medicines? Evidence from the Danish hospital sector," Health Policy, Elsevier, vol. 111(1), pages 68-77.

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