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`Me-Too' Innovation in Pharmaceutical Markets

Author

Listed:
  • Jena Anupam B

    (Harvard Medical School)

  • Calfee John E.

    (American Enterprise Institute)

  • Mansley Edward C

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

  • Philipson Tomas J

    (University of Chicago)

Abstract

Critics of me-too innovation often argue that follow-on drugs offer little incremental clinical value over existing pioneer products, while at the same time increasing health care costs. We examine whether consumers view follow-on and pioneer drugs as close substitutes or distinct clinical therapies. For five major classes of drugs, we find that large reductions in the price of pioneer molecules after patent expiration--which would typically lead to decreased consumption of strong substitutes--have no effect on the trend in demand for follow-on drugs. Our findings are likely unaffected by health insurance, competitive pricing of me-toos, marketing, and switching costs.

Suggested Citation

  • Jena Anupam B & Calfee John E. & Mansley Edward C & Philipson Tomas J, 2009. "`Me-Too' Innovation in Pharmaceutical Markets," Forum for Health Economics & Policy, De Gruyter, vol. 12(1), pages 1-21, November.
    • Handle: RePEc:bpj:fhecpo:v:12:y:2009:i:1:n:5
    DOI: 10.2202/1558-9544.1138
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    Citations

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    Cited by:

    1. Michael Mueller & Alexander Frenzel, 2015. "Competitive pricing within pharmaceutical classes: evidence on “follow-on” drugs in Germany 1993–2008," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(1), pages 73-82, January.
    2. 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.
    3. John Rizzo & Richard Zeckhauser, 2009. "Generic script share and the price of brand-name drugs: the role of consumer choice," International Journal of Health Economics and Management, Springer, vol. 9(3), pages 291-316, September.
    4. Siotis, Georges & Ornaghi, Carmine & Castanheira, Micael, 2019. "Market Definition and Competition Policy Enforcement in the Pharmaceutical Industry," CEPR Discussion Papers 14035, C.E.P.R. Discussion Papers.
    5. Hostenkamp, Gisela, 2013. "Do follow-on therapeutic substitutes induce price competition between hospital medicines? Evidence from the Danish hospital sector," Health Policy, Elsevier, vol. 111(1), pages 68-77.
    6. Siotis, Georges & Castanheira, Micael & de Frutos, Maria-Angeles & Ornaghi, Carmine, 2017. "The Unexpected Consequences of Asymmetric Competition. An Application to Big Pharma," CEPR Discussion Papers 11813, C.E.P.R. Discussion Papers.
    7. Michael D. Frakes & Melissa F. Wasserman, 2020. "Investing in Ex Ante Regulation: Evidence from Pharmaceutical Patent Examination," NBER Working Papers 27579, National Bureau of Economic Research, Inc.

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