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Drug approval decision times, international reference pricing and strategic launches of new drugs

Listed author(s):
  • Izabela Jelovac

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

This paper analyzes how drug approval procedures influence the incentives of pharmaceutical firms to launch new drugs in the presence of international reference pricing. First, we show that the set of countries in which a firm commercializes a new drug is larger when countries do not approve this new drug simultaneously. We also show that a firm's best response to international reference pricing is to never launch a new drug sequentially as long as the difference in drug approval times between countries is small enough. Furthermore, we show that a firm's incentives to launch a new drug in one or another country are the same if the drug approval times are identical across countries or if the difference between approval times are small enough. However, we show that these incentives can change if the approval times differences across countries are large enough.

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Paper provided by HAL in its series Post-Print with number halshs-01178636.

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Date of creation: 28 May 2015
Publication status: Published in European Workshop on Health Economics, Toulouse School of Economics, Toulouse, 28-29 mai 2015, May 2015, Toulouse, France
Handle: RePEc:hal:journl:halshs-01178636
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01178636
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Nicolas Houy & Izabela Jelovac, 2015. "Drug Launch Timing and International Reference Pricing," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 978-989, August.
  2. Patricia M. Danzon & Y. Richard Wang & Liang Wang, 2005. "The impact of price regulation on the launch delay of new drugs-evidence from twenty-five major markets in the 1990s," Health Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 269-292.
  3. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-727, September.
  4. Nebibe Varol & Joan Costa-Font & Alistair McGuire, 2012. "Does Adoption of Pharmaceutical Innovation Respond to Changes in the Regulatory Environment?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(3), pages 531-553.
  5. Jean O. Lanjouw, 2005. "Patents, Price Controls and Access to New Drugs: How Policy Affects Global Market Entry," Working Papers 61, Center for Global Development.
  6. Sah, Raaj Kumar & Stiglitz, Joseph E, 1988. "Committees, Hierarchies and Polyarchies," Economic Journal, Royal Economic Society, vol. 98(391), pages 451-470, June.
  7. Benjamin Chiao & Josh Lerner & Jean Tirole, 2007. "The rules of standard-setting organizations: an empirical analysis," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 905-930, December.
  8. Josh Lerner & Jean Tirole, 2006. "A Model of Forum Shopping," American Economic Review, American Economic Association, vol. 96(4), pages 1091-1113, September.
  9. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
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