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Entry Time Effects and Follow-on Drugs Competition

  • Luiz Flavio Andrade

    ()

    (Gate-Groupe d'analyse théorique et économique)

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.

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File URL: http://www.irdes.fr/EspaceAnglais/Publications/WorkingPapers/DT49EntryTimeEffectsDrugsCompetition.pdf
File Function: First version, 2012
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Paper provided by IRDES institut for research and information in health economics in its series Working Papers with number DT49.

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Length: 30 pages
Date of creation: Jun 2012
Date of revision: Jun 2012
Handle: RePEc:irh:wpaper:dt49
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  1. Henry Grabowski, 2002. "Patents, Innovation and Access to New Pharmaceuticals," Journal of International Economic Law, Oxford University Press, vol. 5(4), pages 849-860, December.
  2. Gregory S. Crawford & Matthew Shum, 2005. "Uncertainty and Learning in Pharmaceutical Demand," Econometrica, Econometric Society, vol. 73(4), pages 1137-1173, 07.
  3. Florence Jusot & Sandy Tubeuf & Alain Trannoy, 2010. "Effort or Circumstances: Does the Correlation Matter for Inequality of Opportunity in Health?," Working Papers DT33, IRDES institut for research and information in health economics, revised Jul 2010.
  4. Clément Nestrigue & Zeynep Or, 2012. "Estimation du surcoût des événements indésirables associés aux soins à l'hôpital en France," Working Papers DT44, IRDES institut for research and information in health economics, revised Feb 2012.
  5. Sirven, Nicolas & Berchet, Caroline, 2011. "Cross-Country Performance in Social Integration of Older Migrants – A European Perspective," Economics Papers from University Paris Dauphine 123456789/9267, Paris Dauphine University.
  6. Catherine Pollak & Nicolas Sirven, 2012. "Active Ageing Beyond the Labour Market: Evidence on Work Environment Motivations," Working Papers DT48, IRDES institut for research and information in health economics, revised May 2012.
  7. Carine Franc & Marc Perronnin & Aurélie Pierre, 2010. "Subscribing to Supplemental Health Insurance in France: A Dynamic Analysis of Adverse Selection," Working Papers DT35, IRDES institut for research and information in health economics, revised Dec 2010.
  8. Nicolas Sirven & Zeynep Or, 2010. "Disparities in Regular Health Care Utilisation in Europe," Working Papers DT37, IRDES institut for research and information in health economics, revised Dec 2010.
  9. Thierry Debrand & Christine Sorasith, 2010. "Out-of-Pocket Maximum Rules under a Compulsatory Health Care Insurance Scheme: A Choice between Equality and Equity," Working Papers DT34, IRDES institut for research and information in health economics, revised Nov 2010.
  10. Catherine Pollak, 2012. "Employed and Happy despite Weak Health? Labour Market Participation and Job Quality of Older Workers with Disabilities," Working Papers DT45, IRDES institut for research and information in health economics, revised Mar 2012.
  11. Luc Behaghel & Didier Blanchet & Thierry Debrand & Muriel Roger, 2011. "Disability and social security reforms: The French case," PSE Working Papers halshs-00556722, HAL.
  12. Mohamed Ali Ben Halima & Thierry Debrand, 2011. "Durée d’arrêt de travail, salaire et Assurance maladie : application microéconométrique à partir de la base Hygie," Working Papers DT42, IRDES institut for research and information in health economics, revised Sep 2011.
  13. Alka Chadha & Åke Blomqvist, 2005. "Patent Races, “Me-Too” Drugs, and Generics: A Developing-World Perspective," Departmental Working Papers wp0513, National University of Singapore, Department of Economics.
  14. Grabowski, Henry, 2002. "Patents, Innovation and Access to New Pharmaceuticals," Working Papers 02-28, Duke University, Department of Economics.
  15. Agarwal, Rajshree & Gort, Michael, 2001. "First-Mover Advantage and the Speed of Competitive Entry, 1887-1986," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 161-77, April.
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