Generic Entry into a Regulated Pharmaceutical Market

25 Pages Posted: 11 Jun 2007

See all articles by Iván Moreno-Torres

Iván Moreno-Torres

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Jaume Puig-Junoy

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Joan-Ramon Borrell

University of Barcelona

Date Written: February 2007

Abstract

The aim of this paper is to analyze empirically entry decisions by generic firms into markets with tough regulation. Generic drugs might be a key driver of competition and cost containment in pharmaceutical markets. The dynamics of reforms of patents and pricing across drug markets in Spain are useful to identify the impact of regulations on generic entry. Estimates from a count data model using a panel of 86 active ingredients during the 1999-2005 period show that the drivers of generic entry in markets with price regulations are similar to less regulated markets: generic firms entries are positively affected by the market size and time trend, and negatively affected by the number of incumbent laboratories and the number of substitutes active ingredients. We also find that contrary to what policy makers expected, the system of reference pricing restrains considerably the generic entry. Short run brand name drug price reductions are obtained by governments at the cost of long run benefits from fostering generic entry and post-patent competition into the markets.

Keywords: Entry, Generic Drugs, Pharmaceutical industry, Reference pricing

JEL Classification: I11, L11, L65

Suggested Citation

Moreno-Torres, Iván and Puig-Junoy, Jaume and Borrell Arqué, Joan-Ramon, Generic Entry into a Regulated Pharmaceutical Market (February 2007). iHEA 2007 6th World Congress: Explorations in Health Economics Paper, Available at SSRN: https://ssrn.com/abstract=992685 or http://dx.doi.org/10.2139/ssrn.992685

Iván Moreno-Torres

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Jaume Puig-Junoy

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Joan-Ramon Borrell Arqué (Contact Author)

University of Barcelona ( email )

Av. Diagonal, 690
Barcelona, 08034
Spain

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