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Generic Entry and the Pricing of Pharmaceuticals

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  • Richard G. Frank
  • David S. Salkever

Abstract

During the 1980s the share of prescriptions sold by retail pharmacies that was accounted for by generic products roughly doubled. The price response to generic entry of brand‐name products has been a source of controversy. In this paper we estimate models of price responses to generic entry in the market for brand‐name and generic drugs. We study a sample of 32 drugs that lost patent protection during the early to mid‐1980s. Our results provide evidence that brand‐name prices increase after generic entry and are accompanied by large decreases in the price of generic drugs.

Suggested Citation

  • Richard G. Frank & David S. Salkever, 1997. "Generic Entry and the Pricing of Pharmaceuticals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 75-90, March.
    • Handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:75-90
    DOI: 10.1111/j.1430-9134.1997.00075.x
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    1. Ernst R. Berndt & Zvi Griliches & Joshua G. Rosett, 1990. "On the Accuracy of Producer Price Indexes for Pharmaceutical Preparations: An Audit Based on Detailed Firm-Specific Data," NBER Working Papers 3490, National Bureau of Economic Research, Inc.
    2. F. M. Scherer, 1993. "Pricing, Profits, and Technological Progress in the Pharmaceutical Industry," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 97-115, Summer.
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