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The Impact of Price Regulation on the Launch Delay of New Drugs - Evidence from Twenty-Five Major Markets in the 1990s

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  • Patricia M. Danzon
  • Y. Richard Wang
  • Liang Wang

Abstract

This study analyzes the effect of pharmaceutical price regulation on delays in new drug launches. Because low price in one market may 'spill-over' to others, though parallel trade and external referencing, manufacturers may rationally prefer longer delay or non-launch to accepting a low price. We use a Cox proportional hazard model to analyze the launch experience in 25 major markets of 85 new chemical entities (NCEs) launched in the UK or US between 1994 and 1998. There are 1,167 observed launches, or about 55% of the maximum. The US leads with 73 launches, followed by Germany (66) and the UK (64). Only 13 NCEs launched in Japan, 26 in Portugal and 28 in New Zealand. Countries with fewer launches also have longer average launch lags. The launch hazard is positively related to expected price and to expected volume, controlling for income per capita. The originator firm(s) characteristics, specifically, launch in home country and global experience, also significantly reduce launch delay. Within the EU, likely parallel export countries have the most negative effects. Our results suggest that countries with lower expected prices or smaller expected market size experience longer delays in new drug access, controlling for per capita income and other country and firm characteristics.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9874.

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Date of creation: Jul 2003
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Handle: RePEc:nbr:nberwo:9874

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  1. Patricia M. Danzon, 1998. "The Economics of Parallel Trade," PharmacoEconomics, Springer Healthcare | Adis, vol. 13(3), pages 293-304.
  2. Danzon, Patricia M & Chao, Li-Wei, 2000. "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 311-57, October.
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Cited by:
  1. Frank R. Lichtenberg, 2012. "Pharmaceutical Innovation and Longevity Growth in 30 Developing and High-income Countries, 2000-2009," NBER Working Papers 18235, National Bureau of Economic Research, Inc.
  2. Patricia M. Danzon & Eric L. Keuffel, 2013. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned? National Bureau of Economic Research, Inc.
  3. Nebibe Varol & Joan Costa-i-Font & Alistair McGuire, 2011. "Explaining Early Adoption on New Medicines: Regulation, Innovation and Scale," CESifo Working Paper Series 3459, CESifo Group Munich.
  4. Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011. "External referencing and pharmaceutical price negotiation," Post-Print halshs-00303682, HAL.
  5. Albane Degrassat-Théas & Pascal Paubel & Olivier Parent de Curzon & Claude Pen & Martine Sinègre, 2013. "Temporary Authorization for Use: Does the French Patient Access Programme for Unlicensed Medicines Impact Market Access After Formal Licensing?," PharmacoEconomics, Springer, vol. 31(4), pages 335-343, April.
  6. Stefan Greß & Jürgen Wasem & Dea Niebuhr, 2006. "Pricing and Reimbursement of Prescription Drugs in German Social Health Insurance," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 4(2), pages 39-47, 07.
  7. Roy, Santanu & Saggi, Kamal, 2011. "Equilibrium parallel import policies and international market structure," Policy Research Working Paper Series 5802, The World Bank.
  8. Saradindu Bhaduri & Thomas Brenner, 2011. "Determinants of drug launch delay in pre-TRIPS India: A survival analysis approach," Working Papers on Innovation and Space 2011-05, Philipps University Marburg, Department of Geography.
  9. Königbauer, Ingrid, 2006. "Dealing with Rising Health Care Costs: The Case of Pharmaceuticals," Munich Dissertations in Economics 5640, University of Munich, Department of Economics.
  10. Hirai, Yuka & Yamanaka, Yosuke & Kusama, Makiko & Ishibashi, Taro & Sugiyama, Yuichi & Ono, Shunsuke, 2012. "Analysis of the success rates of new drug development in Japan and the lag behind the US," Health Policy, Elsevier, vol. 104(3), pages 241-246.
  11. Kamal Saggi & Santanu Roy, 2011. "Strategic Competition and Optimal Parallel Import Policy," Vanderbilt University Department of Economics Working Papers 1117, Vanderbilt University Department of Economics.
  12. Nebibe Varol & Joan Costa-i-Font & Alistair McGuire, 2010. "Do international launch strategies of pharmaceutical corporations respond to changes in the regulatory environment?," LSE Research Online Documents on Economics 29972, London School of Economics and Political Science, LSE Library.
  13. Y. Wang, 2006. "Price competition in the chinese pharmaceutical market," International Journal of Health Care Finance and Economics, Springer, vol. 6(2), pages 119-129, June.
  14. Calfee, John E. & DuPr�, Elizabeth & Villarreal, Mario, 2006. "An Exploratory Analysis of Pharmaceutical Price Disparities and Their Implications Among Six Developed Nations," Working paper 534, Regulation2point0.
  15. Vincenzo Atella & Jay Bhattacharya & Lorenzo Carbonari, 2008. "Pharmaceutical Industry, Drug Quality and Regulation: Evidence from US and Italy," NBER Working Papers 14567, National Bureau of Economic Research, Inc.
  16. Saradindu Bhaduri & Thomas Brenner, 2013. "Examining the determinants of drug launch delay in pre-TRIPS India," The European Journal of Health Economics, Springer, vol. 14(5), pages 761-773, October.
  17. Birg, Laura, 2013. "Pharmaceutical regulation and health policy objectives," Center for European, Governance and Economic Development Research Discussion Papers 183, University of Goettingen, Department of Economics.
  18. Rosella Levaggi & Michele Moretto & Paolo Pertile, 2013. "The dynamics of pharmaceutical regulation and R&D investments," Working Papers 13/2013, University of Verona, Department of Economics.

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