IDEAS home Printed from https://ideas.repec.org/a/sae/medema/v25y2005i1p71-80.html
   My bibliography  Save this article

Impact of Generic Drug Entry on Cost-Effectiveness Analysis

Author

Listed:
  • Ya-Chen Tina Shih

    (Section of Health Services Research, Department of Biostatistics and Applied Mathematics, The University of Texas MD Anderson Cancer Center, Houston, Texas)

  • Shu Han

    (Department of Statistics, Rice University, Houston, Texas)

  • Scott B. Cantor

    (Section of Health Services Research, Department of Biostatistics and Applied Mathematics, The University of Texas MD Anderson Cancer Center, Houston, Texas)

Abstract

The market share of generic drugs has grown substantially since the passage of the Waxman-Hatch Act, increasing from 19% in 1984 to 50% in 2001. At entry, the generic drugs typically are priced lower than brand-name drugs; thus, incorporating the impact of the generic drug entry introduces an additional source of uncertainty in economic models as both the timing of entry and the level of generic drug pricing are subject to variation. In this article, the authors explored the impact of generic drug entry on cost-effectiveness analyses of new or brand-name drugs. Using a mathematical model, they argue that failure to incorporate the impact of generic drug entry will underestimate the incremental cost-effectiveness ratio (ICER) and, thus, overstate the economic benefit of the new product. The authors provide 2 examples to illustrate such impact on short-term and long-term cost-effectiveness analyses. To better assess the uncertainty associated with the impact of generic drug entry, in addition to a deterministic analysis, they also employed a Bayesian probabilistic approach to analyze these examples and presented the results using cost-effectiveness acceptability curves. They conclude that incorporating generic drug entry into pharmacoeconomic models will yield more accurate projections of the ICER and lead to better decision making.

Suggested Citation

  • Ya-Chen Tina Shih & Shu Han & Scott B. Cantor, 2005. "Impact of Generic Drug Entry on Cost-Effectiveness Analysis," Medical Decision Making, , vol. 25(1), pages 71-80, January.
    • Handle: RePEc:sae:medema:v:25:y:2005:i:1:p:71-80
    DOI: 10.1177/0272989X04273139
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0272989X04273139
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0272989X04273139?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Aaron A. Stinnett & John Mullahy, 1998. "Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis," NBER Technical Working Papers 0227, National Bureau of Economic Research, Inc.
    2. Grabowski, Henry G & Vernon, John M, 1992. "Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 331-350, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Hoyle, 2011. "Accounting for the Drug Life Cycle and Future Drug Prices in Cost-Effectiveness Analysis," PharmacoEconomics, Springer, vol. 29(1), pages 1-15, January.
    2. Ya-Chen Shih & Nebiyou Bekele & Ying Xu, 2007. "Use of Bayesian Net Benefit Regression Model to Examine the Impact of Generic Drug Entry on the Cost Effectiveness of Selective Serotonin Reuptake Inhibitors in Elderly Depressed Patients," PharmacoEconomics, Springer, vol. 25(10), pages 843-862, October.
    3. Srivatsa Srinivas, S. & Marathe, Rahul R., 2021. "Averting adverse selection: The Government of India's scheme to distribute affordable medicines," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    4. James F. O’Mahony & Joost van Rosmalen & Ann G. Zauber & Marjolein van Ballegooijen, 2013. "Multicohort Models in Cost-Effectiveness Analysis," Medical Decision Making, , vol. 33(3), pages 407-414, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manuel Antonio Espinoza & Andrea Manca & Karl Claxton & Mark Sculpher, 2018. "Social value and individual choice: The value of a choice‐based decision‐making process in a collectively funded health system," Health Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 28-40, February.
    2. A. E. Ades & Karl Claxton & Mark Sculpher, 2006. "Evidence synthesis, parameter correlation and probabilistic sensitivity analysis," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 373-381, April.
    3. Basu, Anirban & Jena, Anupam B. & Philipson, Tomas J., 2011. "The impact of comparative effectiveness research on health and health care spending," Journal of Health Economics, Elsevier, vol. 30(4), pages 695-706, July.
    4. Bergman , Mats A. & Granlund, David & Rudholm, Niklas, 2016. "Squeezing the last drop out of your suppliers: an empirical study of market-based purchasing policies for generic pharmaceuticals," Umeå Economic Studies 921, Umeå University, Department of Economics.
    5. Tomas J. Philipson & Eric Sun, 2008. "Is the Food And Drug Administration Safe And Effective?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 85-102, Winter.
    6. Roger Feldman & Félix Lobo, 2013. "Competition in prescription drug markets: the roles of trademarks, advertising, and generic names," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(4), pages 667-675, August.
    7. Charles Courtemanche & Art Carden, 2014. "Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices," Southern Economic Journal, John Wiley & Sons, vol. 80(3), pages 565-585, January.
    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, vol. 45(S2), pages 691-723.
    9. Bate, Roger & Jin, Ginger Zhe & Mathur, Aparna, 2011. "Does price reveal poor-quality drugs? Evidence from 17 countries," Journal of Health Economics, Elsevier, vol. 30(6), pages 1150-1163.
    10. Huang Rui & Perloff Jeffrey M & Villas-Boas Sofia B, 2006. "Effects of Sales on Brand Loyalty," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-26, July.
    11. Karl Claxton & Elisabeth Fenwick & Mark J. Sculpher, 2012. "Decision-making with Uncertainty: The Value of Information," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 51, Edward Elgar Publishing.
    12. Simon Eckermann & Tim Coelli, 2008. "Including quality attributes in a model of health care efficiency: A net benefit approach," CEPA Working Papers Series WP032008, School of Economics, University of Queensland, Australia.
    13. Brekke, Kurt R. & Konigbauer, Ingrid & Straume, Odd Rune, 2007. "Reference pricing of pharmaceuticals," Journal of Health Economics, Elsevier, vol. 26(3), pages 613-642, May.
    14. Frank G. Sandmann & Julie V. Robotham & Sarah R. Deeny & W. John Edmunds & Mark Jit, 2018. "Estimating the opportunity costs of bed‐days," Health Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 592-605, March.
    15. Yunyun Wan, 2018. "Brand Loyalty and Generic Entry: Why Do Brand-Name Drug Companies Launch Their Own Generics?," The Japanese Economic Review, Springer, vol. 69(3), pages 340-346, September.
    16. Clarke, Philip M. & Hayes, Alison J., 2009. "Measuring achievement: Changes in risk factors for cardiovascular disease in Australia," Social Science & Medicine, Elsevier, vol. 68(3), pages 552-561, February.
    17. Darius Lakdawalla & Tomas Philipson & Y. Richard Wang, 2006. "Intellectual Property and Marketing," NBER Working Papers 12577, National Bureau of Economic Research, Inc.
    18. Laurent Granier & Sébastien Trinquard, 2011. "Predation in Off-Patent Drug Markets," Post-Print hal-00687806, HAL.
    19. Philipson Tomas J. & Sun Eric & Goldman Dana & Jena Anupam B., 2012. "A Reexamination of the Costs of Medical R&D Regulation," Forum for Health Economics & Policy, De Gruyter, vol. 15(2), pages 1-28, October.
    20. Allen N. Berger & Astrid A. Dick, 2007. "Entry into Banking Markets and the Early‐Mover Advantage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 775-807, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:medema:v:25:y:2005:i:1:p:71-80. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.