Sales Growth of New Pharmaceuticals Across the Globe: The Role of Regulatory Regimes

49 Pages Posted: 21 Nov 2008

See all articles by S. Stremersch

S. Stremersch

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Aurelie Lemmens

Rotterdam School of Management, Erasmus University Rotterdam

Date Written: 15 2008 5,

Abstract

Prior marketing literature has overlooked the role of regulatory regimes in explaining international sales growth of new products. This paper addresses this gap in the context of new pharmaceuticals (15 new molecules in 34 countries) and sheds light on the effect regulatory regimes have on new drug sales across the globe. Based on a time-varying coefficient model, we find that differences in regulation substantially contribute to cross-country variation in sales. One of the regulatory constraints investigated, i.e. manufacturer price controls, has a positive effect on drug sales. The other forms of regulation such as restrictions of physician prescription budgets and the prohibition of direct-to-consumer advertising tend to hurt sales. The effect of manufacturer price controls is similar for newly launched and mature drugs. In contrast, regulations on physician prescription budget and direct-to-consumer advertising have a differential effect for newly launched and mature drugs. While the former hurts mature drugs more, the latter has a larger effect on newly launched drugs. In addition to these regulatory effects, we find that national culture, economic wealth, introduction timing, lagged sales and competition, also affect drug sales. Our findings may be used as input by managers for international launch and sales decisions. They may also be used by public policy administrators to compare drug sales in their country to other countries and to assess the role of regulatory regimes therein.

Keywords: international new product growth, drug, pharmaceutical, regulation, culture, economics, timevarying effects, penalized splines

JEL Classification: C44, M31, M, I18

Suggested Citation

Stremersch, Stefan and Lemmens, Aurélie, Sales Growth of New Pharmaceuticals Across the Globe: The Role of Regulatory Regimes (15 2008 5,). ERIM Report Series Reference No. ERS-2008-026-MKT. Available at SSRN: https://ssrn.com/abstract=1304668

Stefan Stremersch (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 8719 (Phone)
+31 10 408 9160 (Fax)

Aurélie Lemmens

Rotterdam School of Management, Erasmus University Rotterdam ( email )

3000 DR Rotterdam
Netherlands

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