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Entry Time Effects and Follow-on Drugs Competition

Luiz Andrade ()

No DT49, Working Papers from IRDES institut for research and information in health economics

Abstract: Pharmaceutical firms have been criticized for concentrating their efforts of R&D on the so called “me-too” or “follow-on” drugs. There have been many comments against and favourable to the dissemination of these incremental innovations but few papers have broached the subject from an empirical point of view, possibly because identification of “me-too” is not so obvious. This paper focuses on the impact of entry order on “follow-on” drugs competition in the French market between years 2001 and 2007. More precisely, this study examines the effects on market share of first entrants in the follow-on drug market and how this possible competitive advantage changes over time. Our results are coherent with theoretical microeconomic issues concerning the importance of being first. We find evidence that first movers in the follow on drug market have the ability to capture and maintain greater market share for a long period of time. The hierarchical market position of follow on drugs does not seem to be affected by generic drugs emergence. From a dynamic perspective, our analysis shows that market share is positively correlated with the ability of follow on drugs to set prices higher than the average follow-on drug price in a specific therapeutic class (ATC) which means that market power remains considerably important for first movers. Finally we found that the optimum level of innovation to maximize market share is the highest one.

Keywords: Incremental innovation; Follow-on drugs; Entry timing; Market share (search for similar items in EconPapers)
JEL-codes: I12 I18 L51 L65 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-06, Revised 2012-06
New Economics Papers: this item is included in nep-com, nep-hme, nep-ind, nep-ino, nep-ipr, nep-pr~ and nep-tid
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Downloads: (external link)
https://www.irdes.fr/EspaceAnglais/Publications/Wo ... DrugsCompetition.pdf First version, 2012 (application/pdf)

Related works:
Journal Article: Entry time effects and follow-on drug competition (2016) Downloads
Working Paper: Entry time effects and follow-on drug competition (2016)
Working Paper: Entry time effects and follow on drug competition (2011)
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