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Entry time effects and follow on drug competition

Author

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  • Luiz Flavio Andrade

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Pharmaceutical firms have been criticized for concentrating their efforts of R&D on the so called “me-too” or “follow-on” drugs. There have been many comments against and favourable to the dissemination of these incremental innovations but few papers have broached the subject from an empirical point of view, possibly because identification of “me-too” is not so obvious. This paper focuses on the impact of entry order on “follow-on” drugs competition in the French market between years 2001 and 2007. More precisely, this study examines the effects on market share of first entrants in the follow-on drug market and how this possible competitive advantage changes over time. Our results are coherent with theoretical microeconomic issues concerning the importance of being first. We find evidence that first movers in the follow on drug market have the ability to capture and maintain greater market share for a long period of time. The hierarchical market position of follow on drugs does not seem to be affected by generic drugs emergence. From a dynamic perspective, our analysis shows that market share is positively correlated with the ability of follow on drugs to set prices higher than the average follow-on drug price in a specific therapeutic class (ATC) which means that market power remains considerably important for first movers. Finally we found that the optimum level of innovation to maximize market share is the highest one.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Luiz Flavio Andrade, 2011. "Entry time effects and follow on drug competition," Post-Print halshs-00658247, HAL.
    • Handle: RePEc:hal:journl:halshs-00658247
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    Cited by:

    1. Ana Beatriz D′Avó Luís & Mikyung Kelly Seo, 2021. "Has the development of cancer biomarkers to guide treatment improved health outcomes?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(5), pages 789-810, July.
    2. Mohamed Ali Ben Halima & Thierry Debrand & Camille Regaert, 2012. "Sick Leaves: Understanding Disparities Between French Departments," Working Papers DT50, IRDES institut for research and information in health economics, revised Oct 2012.
    3. Toon van der Gronde & Carin A Uyl-de Groot & Toine Pieters, 2017. "Addressing the challenge of high-priced prescription drugs in the era of precision medicine: A systematic review of drug life cycles, therapeutic drug markets and regulatory frameworks," PLOS ONE, Public Library of Science, vol. 12(8), pages 1-34, August.

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    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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