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

Author

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  • Izabela Jelovac

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure 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)

  • Nicolas Houy

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure 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

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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Suggested Citation

  • Izabela Jelovac & Nicolas Houy, 2017. "Drug approval decision times, international reference pricing and strategic launches of new drugs," Post-Print halshs-01657274, HAL.
    • Handle: RePEc:hal:journl:halshs-01657274
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    References listed on IDEAS

    as
    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, March.
    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. Izabela Jelovac & Nicolas Houy, 2014. "Drug launch timing and international reference pricing," Post-Print halshs-01080543, HAL.
    5. 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.
    6. 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.
    7. Sah, Raaj Kumar & Stiglitz, Joseph E, 1988. "Committees, Hierarchies and Polyarchies," Economic Journal, Royal Economic Society, vol. 98(391), pages 451-470, June.
    8. 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.
    9. 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.
    10. Josh Lerner & Jean Tirole, 2006. "A Model of Forum Shopping," American Economic Review, American Economic Association, vol. 96(4), pages 1091-1113, September.
    11. 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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    Cited by:

    1. Anna-Maria Fontrier & Jennifer Gill & Panos Kanavos, 2019. "International impact of external reference pricing: should national policy-makers care?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(8), pages 1147-1164, November.
    2. Fontrier, Anna-Maria & Gill, Jennifer & Kanavos, Panos, 2019. "International impact of external reference pricing: should national policy makers care?," LSE Research Online Documents on Economics 100929, London School of Economics and Political Science, LSE Library.
    3. Jennifer Gill & Anna-Maria Fontrier & Dionysis Kyriopoulos & Panos Kanavos, 2019. "Variations in external reference pricing implementation: does it matter for public policy?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(9), pages 1375-1397, December.

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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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