Entry Time Effects and Follow-on Drugs Competition
AbstractPharmaceutical firms have been criticized for concentrating their efforts of R&D on the so called “me-too” or “follow-on” drugs. There have been many comments against and favourable to the dissemination of these incremental innovations but few papers have broached the subject from an empirical point of view, possibly because identification of “me-too” is not so obvious. This paper focuses on the impact of entry order on “follow-on” drugs competition in the French market between years 2001 and 2007. More precisely, this study examines the effects on market share of first entrants in the follow-on drug market and how this possible competitive advantage changes over time. Our results are coherent with theoretical microeconomic issues concerning the importance of being first. We find evidence that first movers in the follow on drug market have the ability to capture and maintain greater market share for a long period of time. The hierarchical market position of follow on drugs does not seem to be affected by generic drugs emergence. From a dynamic perspective, our analysis shows that market share is positively correlated with the ability of follow on drugs to set prices higher than the average follow-on drug price in a specific therapeutic class (ATC) which means that market power remains considerably important for first movers. Finally we found that the optimum level of innovation to maximize market share is the highest one.
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Bibliographic InfoPaper provided by IRDES institut for research and information in health economics in its series Working Papers with number DT49.
Length: 30 pages
Date of creation: Jun 2012
Date of revision: Jun 2012
Incremental innovation; Follow-on drugs; Entry timing; Market share.;
Find related papers by JEL classification:
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-14 (All new papers)
- NEP-COM-2012-07-14 (Industrial Competition)
- NEP-HME-2012-07-14 (Heterodox Microeconomics)
- NEP-IND-2012-07-14 (Industrial Organization)
- NEP-INO-2012-07-14 (Innovation)
- NEP-IPR-2012-07-14 (Intellectual Property Rights)
- NEP-TID-2012-07-14 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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MEA discussion paper series
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