Dynamic competition in pharmaceuticals: cross-national evidence from new drug diffusion

We report on an exploratory examination of the extent of differences across fifteen countries and three therapeutic classes (antihypertensives, antidepressants and antiepileptics) in the rate at which medicines in general and new medicines in particular are promoted and then diffuse, as well as relative new|old drug prices. We find substantial heterogeneity across classes and countries in promotion and diffusion. In terms of diffusion, relative prices of old vs. new drugs, and intensity of detailing physicians, we find that somewhat surprisingly, the US is often “in the middle” relative to other countries, and is not an outlier. However, differences across classes are striking. Overall, new drug quantity elasticities with respect to own price are negative, ranging from about −0.75 to −1.1, while cross-price (new drug quantity with respect to old drug price) are positive but small. Total promotion effects on total utilization are generally positive, particularly antidepressants. Promotion of new drugs positively affects the new drug share, while promotion of old drugs negatively affects the new drug share. Promotion of old drugs is surprisingly substantial in some classes and countries. Copyright © 2007 John Wiley & Sons, Ltd.