IDEAS home Printed from https://ideas.repec.org/p/hal/journl/halshs-01937219.html
   My bibliography  Save this paper

Comparing approval procedures for new drugs

Author

Listed:
  • Nicolas Houy

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

  • Izabela Jelovac

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We analyse how drug approval procedures influence the incentives of pharmaceutical firms to commercialise new drugs in the presence of international reference pricing. Since 1995, the European Medicines Agency (EMA) coordinates a centralised approval procedure for specific new drugs in the EU. With such a centralised procedure, the EMA grants simultaneous drug approvals for all EU countries. Alongside, non‐centralised procedures coexist for approvals of other new drugs and approvals can be sequential. We focus on the effects of the exogenous timing of drug approvals, either simultaneous or sequential, and we compare the effects of centralised versus non‐centralised procedures on the firms’ incentives to commercialise new drugs in different markets. In a context of international reference pricing, we show that a centralised procedure limits the number of countries where the firm commercialises new drugs, compared to a non‐centralised procedure. We also show in a simplified framework that countries are better off with non‐centralised procedures, while pharmaceutical firms in theory prefer the drug to be approved everywhere as soon as possible, as in an early centralised procedure. This is in line with the stated objective of the EMA to generate savings for the pharmaceutical firms.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Nicolas Houy & Izabela Jelovac, 2019. "Comparing approval procedures for new drugs," Post-Print halshs-01937219, HAL.
    • Handle: RePEc:hal:journl:halshs-01937219
    DOI: 10.1111/twec.12746
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nicolas Houy & Izabela Jelovac, 2015. "Drug Launch Timing and International Reference Pricing," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 978-989, August.
    2. Patricia M. Danzon & Y. Richard Wang & Liang Wang, 2005. "The impact of price regulation on the launch delay of new drugs—evidence from twenty‐five major markets in the 1990s," Health Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 269-292, March.
    3. Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1989. "Durable-Goods Monopoly with Discrete Demand," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1459-1478, December.
    4. Birg, Laura, 2013. "Pharmaceutical cost-sharing systems and savings for health care systems from parallel trade," University of Göttingen Working Papers in Economics 179, University of Goettingen, Department of Economics.
    5. Laura Birg, 2015. "Externalities of National Pharmaceutical Policy when Markets are Integrated through Parallel Trade," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 558-574, August.
    6. Jean O. Lanjouw, 2005. "Patents, Price Controls and Access to New Drugs: How Policy Affects Global Market Entry," Working Papers 61, Center for Global Development.
    7. Verniers, I.W.J. & Stremersch, S. & Croux, C., 2011. "The Global Entry of New Pharmaceuticals: A Joint Investigation of Launch Window and Price," ERIM Report Series Research in Management ERS-2011-010-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    8. Jerry A. Hausman & Jeffrey K. MacKie-Mason, 1988. "Price Discrimination and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 253-265, Summer.
    9. Verniers, Isabel & Stremersch, Stefan & Croux, Christophe, 2011. "The global entry of new pharmaceuticals: A joint investigation of launch window and price," International Journal of Research in Marketing, Elsevier, vol. 28(4), pages 295-308.
    10. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
    11. Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 5-21, January.
    12. Birg, Laura, 2016. "External reference pricing and the choice of country baskets and pricing rules," University of Göttingen Working Papers in Economics 279, University of Goettingen, Department of Economics.
    13. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Laura Birg, 2023. "Pharmaceutical regulation under market integration through parallel trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1322-1346, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    2. Nicolas Houy & Izabela Jelovac, 2014. "Drug approval decision times, international reference pricing and strategic launches of new drugs," Working Papers halshs-01072741, HAL.
    3. Laura Birg, 2023. "Pharmaceutical regulation under market integration through parallel trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1322-1346, November.
    4. Verdiana Giannetti & Gaia Rubera, 2020. "Innovation for and from emerging countries: a closer look at the antecedents of trickle-down and reverse innovation," Journal of the Academy of Marketing Science, Springer, vol. 48(5), pages 987-1008, September.
    5. Birg, Laura, 2019. "Price Caps versus Reimbursement Limits: Pharmaceutical Regulation under Market Integration through Parallel Trade," University of Göttingen Working Papers in Economics 253, University of Goettingen, Department of Economics, revised 2019.
    6. Fabio Pammolli & Armando Rungi, 2016. "Access to Medicines and European Market Integration," Working Papers 01/2016, IMT School for Advanced Studies Lucca, revised Jan 2016.
    7. Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011. "External referencing and pharmaceutical price negotiation," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 737-756, June.
    8. Nebibe Varol & Joan Costa-i-Font & Alistair McGuire, 2011. "Explaining Early Adoption on New Medicines: Regulation, Innovation and Scale," CESifo Working Paper Series 3459, CESifo.
    9. Birg, Laura, 2016. "External reference pricing and the choice of country baskets and pricing rules," University of Göttingen Working Papers in Economics 279, University of Goettingen, Department of Economics.
    10. Verniers, Isabel & Stremersch, Stefan & Croux, Christophe, 2011. "The global entry of new pharmaceuticals: A joint investigation of launch window and price," International Journal of Research in Marketing, Elsevier, vol. 28(4), pages 295-308.
    11. Eric W. Bond & Kamal Saggi, 2023. "Bargaining over Entry with a Compulsory License Deadline: Price Spillovers and Surplus Expansion," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 20, pages 449-480, World Scientific Publishing Co. Pte. Ltd..
    12. Nicolas Houy & Izabela Jelovac, 2015. "Drug Launch Timing and International Reference Pricing," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 978-989, August.
    13. Abdulkadir Civan & Michael Maloney, 2017. "Launch Decisions of Pharmaceutical Companies," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 1(1), pages 35-58.
    14. Margaret Kyle & Yi Qian, 2014. "Intellectual Property Rights and Access to Innovation: Evidence from TRIPS," NBER Working Papers 20799, National Bureau of Economic Research, Inc.
    15. Watal, Jayashree & Dai, Rong, 2019. "Product patents and access to innovative medicines in a post-trips-era," WTO Staff Working Papers ERSD-2019-05, World Trade Organization (WTO), Economic Research and Statistics Division.
    16. Anke Richter, 2008. "Assessing the Impact of Global Price Interdependencies," PharmacoEconomics, Springer, vol. 26(8), pages 649-659, August.
    17. Geng, Difei & Saggi, Kamal, 2020. "Optimal price regulations in international pharmaceutical markets with generic competition," Journal of Health Economics, Elsevier, vol. 71(C).
    18. Joan Costa-Font & Alistair McGuire & Nebibe Varol, 2015. "Regulation effects on the adoption of new medicines," Empirical Economics, Springer, vol. 49(3), pages 1101-1121, November.
    19. Gamba, S.; & Pertile, P.; & Righetti, G.;, 2022. "Spillovers of Pharmaceutical Price Regulations: evidence from the AMNOG Reform in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 22/20, HEDG, c/o Department of Economics, University of York.
    20. John Boyce & Jeffrey Robert Church & Lucia Vojtassak, "undated". "Capacity Constraints in Durable Goods Monopoly: Coase and Hotelling," Working Papers 2012-07, Department of Economics, University of Calgary, revised 08 Aug 2012.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-01937219. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.