Similar Products at Different Prices: Can Biopharmaceutical Companies Segment Markets?

Richard Manning, Christopher Stomberg, Benjamin Scher, Kathleen Twigg and Andrew Huson

International Journal of the Economics of Business, 2015, vol. 22, issue 2, 231-243

Abstract: New data on Medicare Part B payments show provider-level utilization of two similar but distinct biologic medications used to treat wet age-related macular degeneration. Their interaction provides insight into the ability of manufacturers to effectively segment markets and suggests some analogies for the future interplay between originator biologics and biosimilars. In particular, most ophthalmologists administer a mix of Avastin (used off-label), Lucentis, and other drugs; only a small share exclusively choose Lucentis. This is inconsistent with the hypotheses that (1) the manufacturer is able to effectively segment the market, and (2) the major factor driving physicians' product choice is the financial motivation. The data are consistent with the notion that physicians typically exercise medical judgment on a patient-by-patient basis and that product choice is driven largely by factors other than simple financial interests. This raises important dynamic efficiency considerations regarding incentives for future biologic competition.

Date: 2015
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DOI: 10.1080/13571516.2015.1045739

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