The Regulation of Prescription Drug Competition and Market Responses: Patterns in Prices and Sales Following Loss of Exclusivity

39 Pages Posted: 5 Oct 2013 Last revised: 8 Oct 2014

See all articles by Murray Aitken

Murray Aitken

IMS Institute for Healthcare Informatics

Ernst R. Berndt

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

Barry Bosworth

Brookings Institution - Economic Studies Program

Iain M. Cockburn

Boston University Questrom School of Business; National Bureau of Economic Research (NBER)

Richard G. Frank

Harvard Medical School; National Bureau of Economic Research (NBER)

Michael Kleinrock

IMS Institute for Healthcare Informatics

Bradley Shapiro

University of Chicago - Booth School of Business

Date Written: October 2013

Abstract

We examine six molecules facing initial loss of US exclusivity (LOE, from patent expiration or challenges) between June 2009 and May 2013 that were among the 50 most prescribed molecules in May 2013. We examine prices per day of therapy (from the perspective of average revenue received by retail pharmacy per day of therapy) and utilization separately for four payer types (cash, Medicare Part D, Medicaid, and other third party payer - TPP) and age under vs. 65 and older. We find that quantity substitutions away from the brand are much larger proportionately and more rapid than average price reductions during the first six months following initial LOE. Brands continue to raise prices after generics enter. Expansion of total molecule sales (brand plus generic) following LOE is an increasingly common phenomenon compared with earlier eras. The number of days of therapy in a prescription has generally increased over time. Generic penetration rates are typically highest and most rapid for TPPs, and lowest and slowest for Medicaid. Cash customers and seniors generally pay the highest prices for brands and generics, third party payers and those under 65 pay the lowest prices, with Medicaid and Medicare Part D in between. The presence of an authorized generic during the 180-day exclusivity period has a significant impact on prices and volumes of prescriptions, but this varies across molecules.

Suggested Citation

Aitken, Murray and Berndt, Ernst R. and Bosworth, Barry and Cockburn, Iain M. and Frank, Richard G. and Kleinrock, Michael and Shapiro, Bradley, The Regulation of Prescription Drug Competition and Market Responses: Patterns in Prices and Sales Following Loss of Exclusivity (October 2013). NBER Working Paper No. w19487, Available at SSRN: https://ssrn.com/abstract=2336354

Murray Aitken (Contact Author)

IMS Institute for Healthcare Informatics ( email )

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Ernst R. Berndt

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

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National Bureau of Economic Research (NBER)

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Barry Bosworth

Brookings Institution - Economic Studies Program ( email )

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Iain M. Cockburn

Boston University Questrom School of Business ( email )

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United States
617-353-3775 (Phone)

National Bureau of Economic Research (NBER) ( email )

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Richard G. Frank

Harvard Medical School ( email )

Department of Health Care Policy
Boston, MA 02115
United States
617-432-0178 (Phone)
617-432-1219 (Fax)

National Bureau of Economic Research (NBER)

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Michael Kleinrock

IMS Institute for Healthcare Informatics ( email )

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United States

Bradley Shapiro

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/bradley.shapiro/

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