Generics and New Goods in Pharmaceutical Price Indexes
AbstractWhen the patent on a drug expires, there are substantial welfare gains to those consumers who, like the Food and Drug Administration, regard branded and generic versions as perfect substitutes. Standard price indexes fail to reflect this, since they treat generics as distinct new goods and 'link them in' with fixed weights. Alternative calculations are presented using detailed data on the wholesale prices of two anti-infective drugs. Significant differences are found: for one of the drugs studied, the standard price index rose by 14 percent over forty-five months following patent expiration, while the authors' preferred alternative index fell by 48 percent. Copyright 1994 by American Economic Association.
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Bibliographic InfoPaper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1664.
Length: 20 pages
Date of creation: 1993
Date of revision:
pharmaceutical industry ; prices;
Other versions of this item:
- Griliches, Zvi & Cockburn, Iain, 1994. "Generics and New Goods in Pharmaceutical Price Indexes," American Economic Review, American Economic Association, vol. 84(5), pages 1213-32, December.
- Zvi Griliches & Iain Cockburn, 1995. "Generics and New Goods in Pharmaceutical Price Indexes," NBER Working Papers 4272, National Bureau of Economic Research, Inc.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
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