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

  • Ernst R. Berndt
  • Patricia M. Danzon
  • Gregory B. Kruse

    (The Wharton School, University of Pennsylvania, USA)

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.

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File URL: http://hdl.handle.net/10.1002/mde.1338
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 4-5 ()
Pages: 231-250

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Handle: RePEc:wly:mgtdec:v:28:y:2007:i:4-5:p:231-250
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Margaret K. Kyle, 2006. "The role of firm characteristics in pharmaceutical product launches," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 602-618, 09.
  2. Ernst R. Berndt & Robert S. Pindyck & Pierre Azoulay, 2003. "Consumption Externalities and Diffusion in Pharmaceutical Markets: Antiulcer Drugs," Journal of Industrial Economics, Wiley Blackwell, vol. 51(2), pages 243-270, 06.
  3. Pradeep K. Chintagunta & Ramarao Desiraju, 2005. "Strategic Pricing and Detailing Behavior in International Markets," Marketing Science, INFORMS, vol. 24(1), pages 67-80, June.
  4. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
  5. John U. Farley & Donald R. Lehmann, 1994. "Cross-National "Laws" and Differences in Market Response," Management Science, INFORMS, vol. 40(1), pages 111-122, January.
  6. Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March.
  7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
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