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Does pharmaceutical price regulation affect the adoption of generic competition?: evidence from the OECD, 1999-2008

Costa-i-Font, Joan and Varol, Nebibe and McGuire, Alistair (2011) Does pharmaceutical price regulation affect the adoption of generic competition?: evidence from the OECD, 1999-2008. CESifo working paper, no. 3441. CESifo Group, Munich, Germany.

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Identification Number: no. 3441

Abstract

Generic competition in the pharmaceutical market is an effective cost-containment mechanism that improves static efficiency and stimulates pharmaceutical innovation. There is no prior study that has empirically analysed the relative delays in adoption of generic competition. This paper aims to investigate how price regulations in the OECD affect the adoption of generic competition following the first global generic launch of each molecule. Drawing upon data from 1999 to 2008, we estimate the impact of ex-ante price and market size expectations on the probability of generic launch using discrete-time duration modelling with cloglog and logit regressions. The econometric strategy employs both parametric and non-parametric duration dependence and includes controls for generic competition in each country, firm characteristics and molecule heterogeneity. Ex-ante profit expectations result in faster adoption; both expected price and market size increase the probability of launch. Our findings suggest that neither molecule nor firm characteristics have a significant effect on generic adoption across different specifications. Instead, evidence indicates that generic competitors follow a locally oriented strategy in contrast to research-intensive pharmaceutical firms.

Item Type: Monograph (Working Paper)
Official URL: http://www.cesifo-group.de/portal/page/portal/ifoH...
Additional Information: © 2011 The Authors
Subjects: R Medicine > RA Public aspects of medicine
R Medicine > RS Pharmacy and materia medica
JEL classification: I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets
L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation
Sets: Departments > European Institute
Departments > Social Policy
Collections > Economists Online
Research centres and groups > LSE Health
Date Deposited: 25 Jul 2011 11:40
Last Modified: 27 Mar 2012 09:30
URI: http://eprints.lse.ac.uk/id/eprint/37537

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