Pharmaceutical Use Following Generic Entry: Paying Less and Buying Less

Peter J. Huckfeldt and Christopher Knittel

No 17046, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the effects of generic entry on prices and utilization using both event study models that exploit the differential timing of generic entry across drug molecules and cast studies. Our analysis examines drugs treating hypertension, high blood pressure, type 2 diabetes, and depression using price and utilization data from the Medical Expenditure Panel Survey. We find that utilization of drug molecules starts decreasing in the two years prior to generic entry and continues to decrease in the years following generic entry, despite decreases in prices offered by generic versions of a drug. This decrease coincides with the market entry and increased utilization of branded reformulations of a drug going off patent. We show case study evidence that utilization patterns coincide with changes in marketing by branded drug manufacturers. While the reformulations---often extended-release versions of the patent-expiring drug---offer potential health benefits, the FDA does not require evidence that the reformulations are improvements over the previous drug in order to grant a patent. Indeed, in a number of experiments comparing the efficacies of the patent-expiring and reformulated drugs do not find statistical differences in health outcomes calling into question the patent-extension policy.

JEL-codes: I18 L11 M3 O31 O38 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-com, nep-hea, nep-ino, nep-ipr and nep-pr~
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References: View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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