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The Competitive Effects of Drug Withdrawals

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  • John Cawley
  • John A. Rizzo

Abstract

In September 1997, the anti-obesity drugs Pondimin and Redux, ingredients in the popular drug combination fen-phen, were withdrawn from the market for causing potentially fatal side effects. That event provides an opportunity for studying how consumers respond to drug withdrawals. In theory, remaining drugs in the therapeutic class could enjoy competitive benefits, or suffer negative spillovers, from the withdrawal of a competing drug. Our findings suggest that, while the withdrawal of a rival drug may impose negative spillovers in the form of higher patient quit rates, on the whole non-withdrawn drugs in the same therapeutic class enjoy competitive benefits in the form of higher utilization.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11223.

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Date of creation: Mar 2005
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Publication status: published as Cawley, John, and John A. Rizzo. “Spillover Effects of Prescription Drug Withdrawals.” Advances in Health Economics and Health Services Research, 2008, 19: 119-144.
Handle: RePEc:nbr:nberwo:11223

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  1. Scott Stern & Manuel Trajtenberg, 1998. "Empirical Implications of Physician Authority in Pharmaceutical Decisionmaking," NBER Working Papers 6851, National Bureau of Economic Research, Inc.
  2. Dowdell, Thomas D. & Govindaraj, Suresh & Jain, Prem C., 1992. "The Tylenol Incident, Ensuing Regulation, and Stock Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 27(02), pages 283-301, June.
  3. Rosenthal Meredith B. & Berndt Ernst R. & Donohue Julie M. & Epstein Arnold M. & Frank Richard G., 2003. "Demand Effects of Recent Changes in Prescription Drug Promotion," Forum for Health Economics & Policy, De Gruyter, De Gruyter, vol. 6(1), pages 1-28, January.
  4. Z. John Lu & William S. Comanor, 1998. "Strategic Pricing Of New Pharmaceuticals," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 108-118, February.
  5. Gregg A. Jarrell & Sam Peltzman, 1984. "The Impact of Product Recalls on the Wealth of Sellers," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 33, Chicago - Center for Study of Economy and State.
  6. Dranove, David & Olsen, Chris, 1994. "The Economic Side Effects of Dangerous Drug Announcements," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 37(2), pages 323-48, October.
  7. Parvez Ahmed & John Gardella & Sudhir Nanda, 2002. "Wealth Effect of Drug Withdrawals on Firms and Their Competitors," Financial Management, Financial Management Association, Financial Management Association, vol. 31(3), Fall.
  8. Davina C. Ling & Ernst R. Berndt & Margaret K. Kyle, 2002. "Deregulating Direct-to-Consumer Marketing of Prescription Drugs: Effects on Prescription and Over-the-Counter Product Sales," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 45(S2), pages 691-723.
  9. Ernst R. Berndt, 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 16(4), pages 45-66, Fall.
  10. John Cawley, 2004. "The Impact of Obesity on Wages," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
  11. Pierre Azoulay, 2002. "Do Pharmaceutical Sales Respond to Scientific Evidence?," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 11(4), pages 551-594, December.
  12. repec:reg:wpaper:425 is not listed on IDEAS
  13. Bosch, Jean-Claude & Eckard, E Woodrow & Singal, Vijay, 1998. "The Competitive Impact of Air Crashes: Stock Market Evidence," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 41(2), pages 503-19, October.
  14. Hill, Joanne & Schneeweis, Thomas, 1983. " The Effect of Three Mile Island on Electric Utility Stock Prices: A Note," Journal of Finance, American Finance Association, American Finance Association, vol. 38(4), pages 1285-92, September.
  15. Frank R. Lichtenberg & Tomas J. Philipson, 2002. "The Dual Effects of Intellectual Property Regulations: Within- and Between-Patent Competition in the U.S. Pharmaceuticals Industry," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 45(S2), pages 643-672.
  16. Meredith B. Rosenthal & Ernst R. Berndt & Julie M. Donohue & Arnold M. Epstein & Richard G. Frank, 2003. "Demand Effects of Recent Changes in Prescription Drug Promotion," NBER Chapters, National Bureau of Economic Research, Inc, in: Frontiers in Health Policy Research, Volume 6, pages 1-26 National Bureau of Economic Research, Inc.
  17. Rizzo, John A, 1999. "Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 42(1), pages 89-116, April.
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