Do Drugmakers "revenue Target"? Evidence from the Differential Timing of Biosimilar Entry Across Markets

Benedic Ippolito, Loren Adler and Conrad Milhaupt
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Benedic Ippolito: American Enterprise Institute

AEI Economic Perspectives, 2022

Abstract: There is debate about whether regulating drug prices in Medicare will lead manufacturers to compensate by increasing revenues from the unregulated commercial market. We offer evidence on this question by considering how manufacturers responded in a related setting—when they lost revenues due to biosimilar entry in the European Union but maintained monopoly rights in the unregulated US market. We show that, despite sharp reductions to net revenues in the EU, there was not an offsetting increase in US net revenues even though drugmakers held the same theoretical ability to make up losses as they would under Medicare-specific rate regulation. These data are consistent with manufacturers already using their full market power in the US.

Keywords: AEI Economic Perspectives; Drug Pricing; Medicare (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2022
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