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The Competitive Effects of Drug Withdrawals

  • John Cawley
  • John A. Rizzo

In September 1997, the anti-obesity drugs Pondimin and Redux, ingredients in the popular drug combination fen-phen, were withdrawn from the market for causing potentially fatal side effects. That event provides an opportunity for studying how consumers respond to drug withdrawals. In theory, remaining drugs in the therapeutic class could enjoy competitive benefits, or suffer negative spillovers, from the withdrawal of a competing drug. Our findings suggest that, while the withdrawal of a rival drug may impose negative spillovers in the form of higher patient quit rates, on the whole non-withdrawn drugs in the same therapeutic class enjoy competitive benefits in the form of higher utilization.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11223.

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Date of creation: Mar 2005
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Publication status: published as Cawley, John, and John A. Rizzo. “Spillover Effects of Prescription Drug Withdrawals.” Advances in Health Economics and Health Services Research, 2008, 19: 119-144.
Handle: RePEc:nbr:nberwo:11223
Note: HC
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  13. Rizzo, John A, 1999. "Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 89-116, April.
  14. Hill, Joanne & Schneeweis, Thomas, 1983. " The Effect of Three Mile Island on Electric Utility Stock Prices: A Note," Journal of Finance, American Finance Association, vol. 38(4), pages 1285-92, September.
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