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Preferred supplier contracts in post-patent prescription drug markets

Author

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  • Carl Rudolf Blankart

    (Universität Hamburg
    Brown University)

  • Tom Stargardt

    (Universität Hamburg)

Abstract

In recent years, the expiration of patents for large drug classes has increased the importance of post-patent drug markets. However, previous research has focused solely on patent drug markets. In this study, the authors evaluate the influence of preferred supplier contracts, the German approach to tendering, in post-patent drug markets using a hierarchical market share attraction model. The authors find that preferred supplier contracts are a powerful strategic instrument for generic manufacturers in a highly competitive environment. They quantify the effects of signing a preferred supplier contract and show that brand-name manufacturers are vulnerable to tendering. Therefore, brand-name manufacturers should readjust their strategies and consider including preferred supplier contracts in their marketing mix. In addition, the authors employ a simulation to demonstrate that a first-mover advantage might be gained from signing a preferred supplier contract. Furthermore, their results can be used as a blueprint for decision makers in the pharmaceutical industry to assess the market share effects of different contracting strategies regarding preferred supplier contracts.

Suggested Citation

  • Carl Rudolf Blankart & Tom Stargardt, 2017. "Preferred supplier contracts in post-patent prescription drug markets," Health Care Management Science, Springer, vol. 20(3), pages 419-432, September.
    • Handle: RePEc:kap:hcarem:v:20:y:2017:i:3:d:10.1007_s10729-016-9362-6
    DOI: 10.1007/s10729-016-9362-6
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    Cited by:

    1. Herr, A. & Suppliet, M., 2011. "Co-Payment Exemptions and Reference Prices: an Empirical Study of Pharmaceutical Prices in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 11/18, HEDG, c/o Department of Economics, University of York.
    2. Wouters, Olivier J. & Sandberg, Dale M. & Pillay, Anban & Kanavos, Panos G., 2019. "The impact of pharmaceutical tendering on prices and market concentration in South Africa over a 14-year period," Social Science & Medicine, Elsevier, vol. 220(C), pages 362-370.
    3. Wouters, Olivier J. & Sandberg, Dale M. & Pillay, Anban & Kanavos, Panos, 2018. "The impact of pharmaceutical tendering on prices and market concentration in South Africa over a 14-year period," LSE Research Online Documents on Economics 90828, London School of Economics and Political Science, LSE Library.
    4. Suppliet, Moritz & Herr, Annika, 2016. "Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets," Other publications TiSEM 4d692f0e-8577-4392-b413-2, Tilburg University, School of Economics and Management.
    5. Sabine Vogler & Katharina Habimana & Manuel Alexander Haasis & Stefan Fischer, 2024. "Pricing, Procurement and Reimbursement Policies for Incentivizing Market Entry of Novel Antibiotics and Diagnostics: Learnings from 10 Countries Globally," Applied Health Economics and Health Policy, Springer, vol. 22(5), pages 629-652, September.
    6. Nikolaos Maniadakis & Anke-Peggy Holtorf & José Otávio Corrêa & Fotini Gialama & Kalman Wijaya, 2018. "Shaping Pharmaceutical Tenders for Effectiveness and Sustainability in Countries with Expanding Healthcare Coverage," Applied Health Economics and Health Policy, Springer, vol. 16(5), pages 591-607, October.
    7. Katharina Elisabeth Fischer & Taika Koch & Karel Kostev & Tom Stargardt, 2018. "The impact of physician-level drug budgets on prescribing behavior," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(2), pages 213-222, March.

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