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Four Facts Concerning Competition in U.S. Generic Prescription Drug Markets

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  • Rena M. Conti
  • Ernst R. Berndt

Abstract

We establish four facts concerning competition among U.S. generic drug suppliers, using IQVIA’s National Sales Perspective™ 2004Q4 – 2016Q3 data. We define a unique product market (“molform”), consisting of the combination of a molecule active ingredient and a route of administration formulation, aggregated over different dosages and strengths. We find: (i) supply exhibits substantial churning in entrants and exits; (ii) volume-weighted use concentrates in older generic molform cohorts; (iii) the extent of competition is greatest for the oldest molform cohorts and is smallest for the youngest molform cohorts. With a median of one competitor, the extent of competition in the youngest molform cohort is very limited; and (iv) supplier-molform annual revenues are typically small, are largest for relatively young drugs, but are heavily right skewed. These four facts provide an empirical platform on which to construct and empirically evaluate hypotheses regarding generic drug market structure, performance, and possible policy reforms.

Suggested Citation

  • Rena M. Conti & Ernst R. Berndt, 2019. "Four Facts Concerning Competition in U.S. Generic Prescription Drug Markets," NBER Working Papers 26194, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26194
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    1. Ernst Berndt & Murray Aitken, 2011. "Brand Loyalty, Generic Entry and Price Competition in Pharmaceuticals in the Quarter Century after the 1984 Waxman-Hatch Legislation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(2), pages 177-201.
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    Cited by:

    1. Nguyen Xuan Nguyen & Steven H. Sheingold & Wafa Tarazi & Arielle Bosworth, 2022. "Effect of Competition on Generic Drug Prices," Applied Health Economics and Health Policy, Springer, vol. 20(2), pages 243-253, March.

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    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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