IDEAS home Printed from https://ideas.repec.org/p/pav/demwpp/demwp0209.html
   My bibliography  Save this paper

Competition between Generic and Brand Name Drugs: New Evidence from the U.S. Pharmaceutical Market

Author

Listed:
  • Alberto Cavaliere

    (University of Pavia)

  • Ashin Moayedizadeh

    (University of Pavia)

Abstract

This paper explores different aspects of competition in the U.S. pharmaceutical industry in order to broaden our insight into price competition in the pharmaceutical market. The main focus is on the effects of patent expiry and generic entry on the brand and generic name drug prices. Using an unbalanced panel dataset of 19 branded and corresponding generic drugs, which faced their first generic entry between 2010 and 2014, we discovered that the Generic Competition Paradox does not arise according to the results obtained with our dataset. Though prices of brand-name drugs are continuously rising, each new generic entrant is associated with an average 2.6 percent decrease in the brand-name drug price. Moreover, the empirical findings in this study fully support the idea of market segmentation based on insurance coverage. We can state that after generic entry, the originator firms appear to demand higher prices in order to exercise price discrimination and exploit the market segment that is less price sensitive.

Suggested Citation

  • Alberto Cavaliere & Ashin Moayedizadeh, 2022. "Competition between Generic and Brand Name Drugs: New Evidence from the U.S. Pharmaceutical Market," DEM Working Papers Series 209, University of Pavia, Department of Economics and Management.
  • Handle: RePEc:pav:demwpp:demwp0209
    as

    Download full text from publisher

    File URL: https://economiaemanagement.dip.unipv.it/sites/dip10/files/2022-12/DEMWP0209.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Pharmaceutical industry; Generic entry; Brand drug price; Generic Competition Paradox; Market segmentation theory;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pav:demwpp:demwp0209. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alice Albonico (email available below). General contact details of provider: https://edirc.repec.org/data/dppavit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.