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Taking the competitor’s pill: When combination therapies enter pharmaceutical markets

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  • Brekke, Kurt R.
  • Dalen, Dag Morten
  • Straume, Odd Rune

Abstract

We study the competitive effects of combination therapies in pharmaceutical markets, which crucially hinge on the additional therapeutic value of combinatory use of drugs and the therapeutic substitutability with the most relevant monotherapy. If the therapeutic value is sufficiently large, the introduction of combination therapies leads to higher prices and, somewhat paradoxically, may reduce the health plan’s surplus, defined as total health benefits net of drug expenditures. If the firms are allowed to coordinate their price setting, this will lead to higher prices under uniform pricing but lower prices under indication-based pricing. Allowing for the latter type of pricing scheme might increase allocational efficiency, but only at the expense of higher drug expenditures.

Suggested Citation

  • Brekke, Kurt R. & Dalen, Dag Morten & Straume, Odd Rune, 2025. "Taking the competitor’s pill: When combination therapies enter pharmaceutical markets," Journal of Health Economics, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:jhecon:v:101:y:2025:i:c:s0167629625000104
    DOI: 10.1016/j.jhealeco.2025.102976
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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