Markups and Fixed Costs in Generic and Off-Patent Pharmaceutical Markets

Sharat Ganapati and Rebecca McKibbin

No 29206, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There is wide dispersion in pharmaceutical prices across countries with comparable quality standards. Under monopoly, off-patent and generic drug prices are at least four times higher in the United States than in comparable English-speaking high income countries. With five or more competitors, off-patent drug prices are similar or lower. Our analysis shows that differential US markups are largely driven by the market power of drug suppliers and not due to wholesale intermediaries or pharmacies. Furthermore, we show that the traditional mechanism of reducing market power – free entry – is limited because implied entry costs are substantially higher in the US.

JEL-codes: F14 I11 L44 L65 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-com, nep-hea, nep-ind, nep-ipr, nep-isf and nep-reg
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Published as Sharat Ganapati, Rebecca McKibbin; Markups and Fixed Costs in Generic and Off-Patent Pharmaceutical Markets. The Review of Economics and Statistics 2021

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Journal Article: Markups and Fixed Costs in Generic and Off-Patent Pharmaceutical Markets (2023)
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