Changing Market Dynamics in the Pharmaceutical Industry: Analysis Using Data from the Last Ten Years
Posted: 18 Sep 2019
Date Written: September 9, 2019
Abstract
Using a panel dataset of 82 drugs that lost patent exclusivity in 2009-2018, we examine: (a) how brand prices change pre and post generic entry; (b) the evolution of generic share and prices in response to generic entry and (c) the market impact of follow-on products and authorized generics. We find, contrary to many prior studies, the rate of change of brand prices do moderate after generic entry; and in some cases, brands lower their price just after the onset of generic competition. Evidence does not support the proposition that brands increase prices in the period just before generic entry. We find that follow-on drugs have considerably higher generic-to-brand price ratio, and the rate of brands’ share erosion is significantly lower in markets with authorized generics. Markets with a single generic manufacturer throughout the post-entry period are found to have shallower than average decrease in prices and slower uptake of generic share.
Keywords: Pharmaceutical industry, competition, generic substitution
JEL Classification: I10, I11, L4, L1
Suggested Citation: Suggested Citation