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Do international launch strategies of pharmaceutical corporations respond to changes in the regulatory environment?

Varol, Nebibe, Costa-i-Font, Joan and McGuire, Alistair (2010) Do international launch strategies of pharmaceutical corporations respond to changes in the regulatory environment? LSE Health working papers, 19/2010. LSE Health, London School of Economics and Political Science, London, UK. ISBN 9780853284604

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Abstract

This paper investigates how regulation impinges on the launch strategies of international pharmaceutical corporations for new molecules and generics across the main OECD markets during 1960-2008. Comprehensive IMS data is used to analyze the international diffusion of 845 molecules from 14 different anatomic therapeutic categories using non-parametric survival analysis. The paper focuses on two main regulatory changes that reshaped the barriers to entry substantially: the US Hatch-Waxman Act in 1984 and the establishment of the European Medicines Agency (EMA) in 1995. We find that legal transaction costs have a significant impact on timing of launch. Stringent market authorization requirements for new pharmaceutical products in the US after 1962 resulted in a significant US drug lag in the introduction of pharmaceutical innovation vis-à-vis Europe during 1960-1984. However, financial incentives of the 1984 Hatch-Waxman Act proved effective in closing this lag. A more streamlined EMA regulatory approval process has reduced barriers to entry in Europe enabling quicker diffusion of pharmaceutical products, yet a marked pattern of delay in adoption of innovation is still evident due to local differences in pricing regulations. New molecule launch strategically takes place first in higher-priced EU markets as a result of threat of arbitrage and price dependency across the member states. Finally, the impact of price controls on the launch timing of pharmaceutical innovation translates to the adoption of imitative pharmaceutical products-hampering access not only to new technologies but also to cost-saving substitute products.

Item Type: Monograph (Working Paper)
Official URL: http://www2.lse.ac.uk/LSEHealthAndSocialCare/LSEHe...
Additional Information: © 2010 the authors
Library of Congress subject classification: H Social Sciences > HF Commerce
R Medicine > RA Public aspects of medicine
R Medicine > RS Pharmacy and materia medica
Sets: Departments > European Institute
Departments > Social Policy
Research centres and groups > LSE Health
Collections > LSE Health Working Paper Series in Health Policy and Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 19/2010
Date Deposited: 16 Nov 2010 11:54
URL: http://eprints.lse.ac.uk/29972/

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