Generic Entry and the Pricing of Pharmaceuticals

Richard G. Frank and David Salkever ()

No 5306, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: During the 1980s the share of prescriptions sold by retail pharmacies that was accounted for by generic products roughly doubled. The price response to generic entry of brand-name products has been a source of controversy. In this paper we estimate models of price responses to generic entry in the market for brand-name and generic drugs. We study a sample of 32 drugs that lost patent protection during the early to mid-1980s. Our results provide strong evidence that brand-name prices increase after entry and are accompanied by large price decreases in the price of generic drugs.

Date: 1995-10
Note: EH
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Published as Journal of Economics & Management Strategy, vol. 6, no. 1, pp. 75-90 Spring 1997.

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