Taking the competitor’s pill: when combination therapies enter pharmaceutical markets

Kurt Brekke (), Dag Morten Dalen () and Odd Rune Straume
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Dag Morten Dalen: Dept. of Economics, BI Norwegian Business School, Postal: BI , Department of Economics, Nydalsveien 37, 0484 Oslo, Norway, https://www.bi.no/om-bi/ansatte/institutt-for-samfunnsokonomi/dag-morten-dalen/?_gl=1*199hhf3*_gcl_au*MTcxNzEyOTE1LjE2OTk2MTc5NjY.*_ga*MTAxMDQ1MDc0Mi4xNjk5NjE3OTY0*_ga_SY3KTJF2RZ*MTcwMDY1NDQzMC40LjEuMTcwMDY1NDgyNy4wLjAuMA..&_ga=2.159359866.1724245387.1700644002-1010450742.1699617964

No 19/2023, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: We study the competitive effects of combination therapies in pharmaceutical markets, which crucially hinge on the additional therapeutic value of combinatory use of drugs and the therapeutic substitutability with the most relevant monotherapy. With large additional therapeutic value, the introduction of combination therapies leads to higher prices and, somewhat paradoxically, may reduce the health plan's surplus. Although combination therapies imply that drugs become both substitutes and complements, we show that drug prices increase if the firms are allowed to coordinate their prices. Allowing for price discrimination might increase allocational efficiency, but only at the expense of higher purchasing costs.

Keywords: Pharmaceutical markets; Combination therapies; Therapeutic competition (search for similar items in EconPapers)
JEL-codes: I11 I18 L13 L65 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2023-11-22
New Economics Papers: this item is included in nep-com, nep-gth and nep-ind
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Working Paper: Taking the competitor´s pill: when combination therapies enter pharmaceutical markets (2023)
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