Pharmaceutical Entry and Exit: Evidence from a Reference Price Reform

In this thesis I study the impact of pharmaceutical reference pricing on the entry/exit of firms. I study how the adoption of reference pricing in Finland affected market competition and firm behaviour. I have a particularly rich panel dataset on package-level sales by chemical ingredient in the Nordics from 2006-2013. As I am able to perfectly match chemical ingredients across different Nordic countries, I am able to control for country-specific variation in the sales of chemical ingredients, that occurred unrelated to the policy reform. I use a differences-in-differences Poisson regression as my main empirical set-up and find only very limited evidence, that the price control policy would have had any effect on firm entry.Using Den-mark as a control group I find that reference pricing decreased growth in the number of firms by 0-8%, but this effect dissipates when adding Norway as an additional control group, suggesting that the results are not robust. I find no effect on branded or generic pharmaceutical firms, but a limited, statistically significant negative effect on parallel importing firms

IPRs, technological and industrial development and growth: the case of the pharmaceutical industry

Discussion of effects of TRIPs on pharmaceuticals in developing countrie

Price Indexes for Drugs: A Review of the Issues

Price indexes provide a way to summarize changes in prices of individual goods and services using an aggregate statistic. An important use of these indexes is to decompose changes in spending into price and quantity components. Price indexes have roles in many areas, including in the National Income and Product Accounts and National Health Expenditure Accounts. Health economists have also used similar decompositions to inform policy debates about which levers may be used to contain cost growth. There are three particular issues that arise when discussing price and quality change. The first is deciding which particular formula and weights is most appropriate in constructing the index. Secondly, some price changes are accompanied by changes in the quality of goods. And lastly, price indexes for medical care do not have a clear link to patients’ welfare. Therefore, this paper focuses on the measurement issues, how the indexes are constructed, and how they may be used to decompose the growth in spending into price and quantity components.

Common Ownership and Market Entry: Evidence from the Pharmaceutical Industry

Common ownership - where two firms are at least partially owned by the same investor - and its impact on product market outcomes has recently drawn a lot of attention from scholars and practitioners alike. Theoretical and empirical research suggests that common ownership can lead to higher prices. This paper focuses on implications for market entry. To estimate the effect of common ownership on entry decisions, we focus on the pharmaceutical industry. In particular, we consider the entry decisions of generic pharmaceutical firms into drug markets opened up by the end of regulatory protection in the US. We first provide a theoretical framework that shows that a higher level of common ownership between the brand firm (incumbent) and potential generic entrant reduces the generic's incentives to entry. We provide robust evidence for this prediction. The effect is large: a one-standard-deviation increase in common ownership decreases the probability of generic entry by 9-13%. We extend our basic theoretical framework and allow for multiple entrants. Our model shows that for sufficiently high levels of common ownership, the classical idea of entry decisions being strategic substitutes can be reversed into being strategic complements. Our empirical results provide some support for these predictions

Markets for Technology and Their Implications for Corporate Strategy.

Although market transactions for technologies, ideas, knowledge or information are limited by several well-known imperfections, there is evidence that they have become more common than in the past. In this paper we analyze how the presence of markets for technology conditions the technology and corporate strategy of firms. The first and most obvious implication is that markets for technology increase the strategy space: firms can choose to license in the technology instead of developing it in-house or they can choose to license out their technology instead of (or in addition to) investing in the downstream assets needed to manufacture and commercialize the goods. The implications for management include more proactive management of intellectual property, greater attention to external monitoring of technologies, and organizational changes to support technology licensing, joint-ventures and acquisition of external technology. For entrepreneurial startups, markets for technology make a focused business model more attractive. At the industry level, markets for technology may lower barriers to entry and increase competition, with important implications for the firms' broader strategy as well.

Entry and Competition in the Pharmaceutical Market following Patent Expiry

This dissertation encompasses three essays on entry and competition in the German generic drug market. The first paper examines the market entry decisions of generic companies and finds that original drug producrs do not create barriers to entry by launching a generic version of the brand drug prior to patent expiry. The second paper examines generic market share dynamics and patients‘ switching behaviors among generic drugs. The analysis shows that generic market shares are little influenced by prices and highly persistent over time, conferring a substantial advantage to first generic entrants. Price differentials likewise have a negligible impact on the likelihood that patients switch to a generic drug offered by a different manufacturer. The third paper investigates generic price differentials and provides evidence of economies of scope and reputation effects

Entry and Patenting in the Software Industry

To what extent are firms kept out of a market by patents covering related technologies? Do patents held by potential entrants make it easier to enter markets? We estimate the empirical relationship between market entry and patents for 27 narrowly defined categories of software products during the period 1990-2004. Controlling for demand, market structure, average patent quality, and other factors, we find that a 10% increase in the number of patents relevant to market reduces the rate of entry by 3-8%, and this relationship intensified following expansions in the patentability of software in the mid-1990s. However, potential entrants with patent applications relevant to a market are more likely to enter it. Finally, patents appear to substitute for complementary assets in the entry process, as patents have both greater entry-deterring and entry-promoting effects for firms without prior experience in other markets.

Does reference pricing drive out generic competition in pharmaceutical markets? Evidence from a policy reform

In this paper we study the impact of reference pricing (RP) on entry of generic firms in the pharmaceutical market. For given prices, RP increases generic firms' expected profit, but since RP also stimulates price competition, the impact on generic entry is theoretically ambiguous. In order to empirically test the effects of RP, we exploit a policy reform in Norway in 2005 that exposed a subset of drugs to RP. Having detailed product-level data for a wide set of substances from 2003 to 2013, we find that RP increased the number of generic drugs. We also find that RP increased market shares of generic drugs, reduced the prices of both branded and generic drugs, and led to a (weakly significant) decrease in total drug expenditures. The reduction in total expenditures was relatively smaller than the reduction in average prices, reflecting the fact that lower prices stimulated total demand.COMPETE, QREN, FEDER, FC