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The Utilization of Medicines beyond Patent Expiration

Author

Listed:
  • Mansley Edward C

    (U.S. Outcomes Research, Merck & Co., Inc.)

  • Teutsch Steven M

    (U.S. Outcomes Research, Merck & Co., Inc.)

  • White Dawn M

    (Merck & Co., Inc.)

  • Busza Jamie D

    (Merck & Co., Inc.)

  • Geisel Steven S

    (Merck & Co., Inc.)

Abstract

BACKGROUND: The utilization of a medicine, both before and after patent expiration, is one of the key determinants of its long-run value to society, as consumer and producer surplus accumulate as utilization occurs. However, while utilization during the years of patent protection is followed fairly closely, usage after that is generally not, as multiple manufacturers are usually involved in the production and sale of generic alternatives. Since utilization beyond patent expiration is poorly understood, we selected a random sample of 60 drugs and assessed their long-term, post-patent use during the period of generic competition.METHODS: At five-year intervals beginning with the year generic competition began (YGCB), we estimated the U.S. utilization of each drug (including all generic and branded formulations) based on the number of prescriptions dispensed as projected by the National Prescription Audit (1964 to 2006) conducted by IMS . These estimates were then compared to each medicine's baseline utilization, defined as the drug's usage during the last full year of patent protection - one year prior to the year generic competition began (YGCB-1). The absolute utilization levels were converted into relative utilization levels, whereby a measure of 1.0 indicates that utilization in that year was equal to utilization in the baseline year.RESULTS: Many drugs continued to be prescribed long after patent protection ended. Even after excluding one medicine that had unusually high utilization 15 to 30 years after generic competition began, relative utilization averaged between 0.64 and 0.99 for the 5-year intervals starting with YGCB+5 and ending with YGCB+30. This was true even though several of the medicines were available over-the-counter (OTC) during some of those years and we did not have data reflecting OTC utilization. After excluding those OTC years (to focus on medicines that had more complete data), relative utilization averaged between 0.88 and 1.15.CONCLUSION: Many medicines continue to be used far beyond their period of patent protection, somewhat countering the view that newer drugs quickly replace older ones. This extended, post-patent utilization can yield additional surplus for society that is over and above the surplus generated during the period of patent protection.

Suggested Citation

  • Mansley Edward C & Teutsch Steven M & White Dawn M & Busza Jamie D & Geisel Steven S, 2008. "The Utilization of Medicines beyond Patent Expiration," Forum for Health Economics & Policy, De Gruyter, vol. 11(2), pages 1-21, November.
    • Handle: RePEc:bpj:fhecpo:v:11:y:2008:i:2:n:9
    DOI: 10.2202/1558-9544.1121
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    References listed on IDEAS

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    1. Darius Lakdawalla & Tomas Philipson & Y. Richard Wang, 2006. "Intellectual Property and Marketing," NBER Working Papers 12577, National Bureau of Economic Research, Inc.
    2. Ernst R. Berndt, 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 45-66, Fall.
    3. Hudson, John, 2000. "Generic take-up in the pharmaceutical market following patent expiry: A multi-country study," International Review of Law and Economics, Elsevier, vol. 20(2), pages 205-221, June.
    4. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
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    Cited by:

    1. McKellar Michael R. & Frank Matthew & Huskamp Haiden & Chernew Michael E., 2012. "The Value of Patent Expiration," Forum for Health Economics & Policy, De Gruyter, vol. 15(1), pages 1-13, November.

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