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Product differentiation, competition and regulation of new drugs: the case of statins in four European countries

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  • Panos Kanavos

    (London School of Economics and Political Science, UK)

  • Joan Costa Font
  • Alistair McGuire

    (London School of Economics and Political Science, UK)

Abstract

This paper examines the determinants of competition in the statins market across four European countries over the 1991-2002 period. Using IMS data from the UK, Germany, France and the Netherlands, the paper analyses the potential existence of competition between branded statins prior to patent expiry. Against a conceptual background of Cournot type quantity competition with product differentiation a demand function is estimated using panel data analysis for the first and second entrants on the market. The results indicate substitutability across the initial market entrants and the subsequent entrant only. This is consistent with potential price sensitivity in the branded market for statins, even when the overall size of market is growing. The results are indicative due to empirical issues surrounding endogeniety of the price variable. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Panos Kanavos & Joan Costa Font & Alistair McGuire, 2007. "Product differentiation, competition and regulation of new drugs: the case of statins in four European countries," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 455-465.
    • Handle: RePEc:wly:mgtdec:v:28:y:2007:i:4-5:p:455-465
    DOI: 10.1002/mde.1354
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    References listed on IDEAS

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    Cited by:

    1. Kurt R. Brekke & Dag Morten Dalen & Odd Rune Straume, 2022. "The price of cost-effectiveness thresholds," NIPE Working Papers 5/2022, NIPE - Universidade do Minho.
    2. Kanavos, Panos G. & Vandoros, Sotiris, 2011. "Determinants of branded prescription medicine prices in OECD countries," Health Economics, Policy and Law, Cambridge University Press, vol. 6(3), pages 337-367, July.
    3. Hostenkamp, Gisela, 2013. "Do follow-on therapeutic substitutes induce price competition between hospital medicines? Evidence from the Danish hospital sector," Health Policy, Elsevier, vol. 111(1), pages 68-77.
    4. Brekke, Kurt R. & Dalen, Dag Morten & Straume, Odd Rune, 2022. "Paying for pharmaceuticals: uniform pricing versus two-part tariffs," Journal of Health Economics, Elsevier, vol. 83(C).
    5. Michael Mueller & Alexander Frenzel, 2015. "Competitive pricing within pharmaceutical classes: evidence on “follow-on” drugs in Germany 1993–2008," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(1), pages 73-82, January.
    6. Brekke, Kurt R. & Dalen, Dag Morten & Straume, Odd Rune, 2023. "The price of cost-effectiveness thresholds under therapeutic competition in pharmaceutical markets," Journal of Health Economics, Elsevier, vol. 90(C).
    7. Sotiris Vandoros, 2014. "Therapeutic Substitution Post‐Patent Expiry: The Cases Of Ace Inhibitors And Proton Pump Inhibitors," Health Economics, John Wiley & Sons, Ltd., vol. 23(5), pages 621-630, May.
    8. Roediger, Alexander & Wilsdon, Tim & Haderi, Artes & Pendleton, Kathy & Azais, Boris, 2019. "Competition between on-patent medicines in Europe," Health Policy, Elsevier, vol. 123(7), pages 652-660.
    9. Vandoros, Sotiris & Carman, Katherine Grace, 2011. "Demand and pricing of preventative healthcare," LSE Research Online Documents on Economics 37159, London School of Economics and Political Science, LSE Library.

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