Pharmaceutical Use Following Generic Entry: Paying Less and Buying Less

50 Pages Posted: 16 May 2011 Last revised: 28 Jul 2013

See all articles by Peter J. Huckfeldt

Peter J. Huckfeldt

RAND Corporation

Christopher R. Knittel

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: May 2011

Abstract

We study the effects of generic entry on prices and utilization using both event study models that exploit the differential timing of generic entry across drug molecules and cast studies. Our analysis examines drugs treating hypertension, high blood pressure, type 2 diabetes, and depression using price and utilization data from the Medical Expenditure Panel Survey. We find that utilization of drug molecules starts decreasing in the two years prior to generic entry and continues to decrease in the years following generic entry, despite decreases in prices offered by generic versions of a drug. This decrease coincides with the market entry and increased utilization of branded reformulations of a drug going off patent. We show case study evidence that utilization patterns coincide with changes in marketing by branded drug manufacturers. While the reformulations---often extended-release versions of the patent-expiring drug---offer potential health benefits, the FDA does not require evidence that the reformulations are improvements over the previous drug in order to grant a patent. Indeed, in a number of experiments comparing the efficacies of the patent-expiring and reformulated drugs do not find statistical differences in health outcomes calling into question the patent-extension policy.

Suggested Citation

Huckfeldt, Peter J. and Knittel, Christopher R., Pharmaceutical Use Following Generic Entry: Paying Less and Buying Less (May 2011). NBER Working Paper No. w17046. Available at SSRN: https://ssrn.com/abstract=1841283

Peter J. Huckfeldt (Contact Author)

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
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Christopher R. Knittel

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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