The Competitive Effects of Drug Withdrawals

Abstract

In September 1997, the anti-obesity drugs Pondimin and Redux, ingredients in the popular drug combination fen-phen, were withdrawn from the market for causing potentially fatal side effects. That event provides an opportunity for studying how consumers respond to drug withdrawals. In theory, remaining drugs in the therapeutic class could enjoy competitive benefits, or suffer negative spillovers, from the withdrawal of a competing drug. Our findings suggest that, while the withdrawal of a rival drug may impose negative spillovers in the form of higher patient quit rates, on the whole non-withdrawn drugs in the same therapeutic class enjoy competitive benefits in the form of higher utilization.