"Me-Too" Innovation in Pharmaceutical Markets
In: Frontiers in Health Policy Research, volume 12
Critics of me-too innovation often argue that follow-on drugs offer little incremental clinical value over existing pioneer products, while at the same time increasing health care costs. We examine whether consumers view follow-on and pioneer drugs as close substitutes or distinct clinical therapies. For five major classes of drugs, we find that large reductions in the price of pioneer molecules after patent expirationwhich would typically lead to decreased consumption of strong substituteshave no effect on the trend in demand for follow-on drugs. Our findings are likely unaffected by health insurance, competitive pricing of me-toos, marketing, and switching costs.
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