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The intensity of competition after patent expiry in pharmaceuticals. A cross-country analysis

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  • Fabio Pammolli
  • Laura Magazzini
  • Luigi Orsenigo

Abstract

[eng] This paper shows that the relationships between the dynamics of drug priees, patent expiry, and competition by multisource drugs vary significantly across countries. A clear distinction seems to emerge. On the one side, systems that rely on market based competition (particularly the US) promote a clear distinction between firms that act as innovators and firms that act as imitators after patent expiry. Original products enjoy premium prices under patent protection, and face fierce price competition after patent expiry. On the contrary, systems that rely on administered prices (particularly France and Italy) nurture strategies of pre-emptive brand proliferation and horizontal differentiation by imitative brand name products, well before patent expiry. Our work confirms that that systems that rely on administered prices have tended to stifle price competition, to protect less efficient companies, and to encourage strategies of incremental innovation and imitation. [fre] Les relations entre les évolutions des prix, l'expiration des brevets et la concurrence varient considérablement, selon les pays. Une distinction nette apparaît. Dans les pays (États-Unis en particulier), dans lesquels domine la concurrence de marché, une distinction claire s'impose entre les firmes innovatrices et les firmes qui imitent après l'expiration des brevets. Les produits originaux bénéficient de primes importantes jusqu'à l'expiration des brevets, qui enclenche une concurrence féroce. Dans les pays à prix administrés (en particulier la France et l'Italie), le système encourage des stratégies de prolifération des marques et de différenciation horizontale, par voie d'imitation bien avant l'expiration des brevets. Ces systèmes à prix administrés ont tendance à étouffer la concurrence par les prix, à protéger les entreprises moins efficientes et à encourager des stratégies d'innovation incrémentales, par imitation.

Suggested Citation

  • Fabio Pammolli & Laura Magazzini & Luigi Orsenigo, 2002. "The intensity of competition after patent expiry in pharmaceuticals. A cross-country analysis," Revue d'Économie Industrielle, Programme National Persée, vol. 99(1), pages 107-131.
  • Handle: RePEc:prs:recind:rei_0154-3229_2002_num_99_1_1829
    Note: DOI:10.3406/rei.2002.1829
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    Citations

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    Cited by:

    1. Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2004. "Dynamic competition in pharmaceuticals," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 5(2), pages 175-182, May.
    2. Jean-Paul Moatti & Bruno Ventelou, 2009. "Économie de la santé dans les pays en développement des paradigmes en mutation," Revue économique, Presses de Sciences-Po, vol. 60(2), pages 241-256.
    3. Herrmann, Andrea M. & Peine, Alexander, 2011. "When 'national innovation system' meet 'varieties of capitalism' arguments on labour qualifications: On the skill types and scientific knowledge needed for radical and incremental product innovations," Research Policy, Elsevier, vol. 40(5), pages 687-701, June.
    4. Laura Magazzini & Fabio Pammolli & Gianluca Papa & Nicola Carmine Salerno, 2005. "Generici vs. Branded: confronto internazionale su prodotti off-patent rimborsati dal SSN," Working Papers CERM 01-2005, Competitività, Regole, Mercati (CERM).
    5. Herrmann, Andrea M., 2008. "On the discrepancies between macro and micro level identification of competitive strategies," MPIfG Discussion Paper 08/6, Max Planck Institute for the Study of Societies.
    6. Gianluca Baio & Laura Magazzini & Antonio Nicita & Fabio Pammolli & Massimo Riccaboni, 2003. "Il Decreto DL 15/04/2002, n. 63 sul Contenimento della Spesa Farmaceutica - Impatto sull'Industria e Distorsioni nel Funzionamento del Mercato," Working Papers CERM 0-2003, Competitività, Regole, Mercati (CERM).
    7. Magazzini, Laura & Pammolli, Fabio & Riccaboni, Massimo, 2004. "Dynamic Competition in Pharmaceuticals: Patent Expiry, Generic Penetration, and Industry Structure," MPRA Paper 15968, University Library of Munich, Germany.
    8. Patricia M. Danzon & Michael F. Furukawa, 2011. "Cross-National Evidence on Generic Pharmaceuticals: Pharmacy vs. Physician-Driven Markets," NBER Working Papers 17226, National Bureau of Economic Research, Inc.
    9. Herrmann, Andrea M., 2008. "Choosing and successfully sustaining competitive strategies in the European pharmaceutical industry," MPIfG Discussion Paper 08/9, Max Planck Institute for the Study of Societies.
    10. Aidan Hollis, 2005. "How do Brands’ “Own Generics” Affect Pharmaceutical Prices?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(4), pages 329-350, December.
    11. repec:dau:papers:123456789/7972 is not listed on IDEAS
    12. Leopold, Christine & Mantel-Teeuwisse, Aukje Katja & Vogler, Sabine & de Joncheere, Kees & Laing, Richard Ogilvie & Leufkens, Hubert G.M., 2013. "Is Europe still heading to a common price level for on-patent medicines? An exploratory study among 15 Western European countries," Health Policy, Elsevier, vol. 112(3), pages 209-216.

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