TY - JOUR AU - Berndt,Ernst R. AU - Bui,Linda AU - Reiley,David AU - Urban,Glen TI - The Roles of Marketing, Product Quality and Price Competition in the Growth and Composition of the U.S. Anti-Ulcer Drug Industry JF - National Bureau of Economic Research Working Paper Series VL - No. 4904 PY - 1994 Y2 - October 1994 UR - http://www.nber.org/papers/w4904 L1 - http://www.nber.org/papers/w4904.pdf N1 - Author contact info: Ernst R. Berndt MIT Sloan School of Management 100 Main Street, E62-518 Cambridge, MA 02142 Tel: 617/253-2665 Fax: 617-227-0880 E-Mail: eberndt@mit.edu Linda Bui Dept. of Economics Brandeis University Mail Stop 021 P.O. Box 9110 Waltham, MA 02454 Tel: 781-736-4848 E-Mail: ltbui@brandeis.edu David H. Reiley, Jr. Department of Economics University of Arizona 401CC McClelland Hall Tucson, AZ 85721 Tel: 520/621-6238 Fax: NA E-Mail: reiley@eller.arizona.edu M1 - published as Ernst R. Berndt, Linda T. Bui, David H. Lucking-Reiley, Glen L. Urban. "The Roles of Marketing, Product Quality, and Price Competition in the Growth and Composition of the U.S. Antiulcer Drug Industry," in Timothy F. Bresnahan and Robert J. Gordon, editors, "The Economics of New Goods" University of Chicago Press (1997) AB - The introduction of Tagamet in the United States in 1977 represented both a revolution in ulcer therapy and the beginning of an important new industry. Today there are four prescription H2- antagonist drugs: Tagamet, Zantac, Pepcid and Axid, and they comprise a multi-billion dollar market for the treatment of ulcers and other gastric acid conditions. In this paper, we examine the determinants of sales in this market, using a carefully constructed data set made possible by IMS America. We concentrate particularly on the marketing of these drugs to physicians through detailing and medical journal advertising, and we make an innovative attempt to distinguish between 'industry-expanding' and 'rivalrous' marketing efforts. We find that the impact of total marketing on the expansion of overall industry sales declines as the number of products on the market increases. In addition, we find that the stock of industry-expanding marketing depreciates at a near-zero rate, while the stock of marketing oriented towards rivalrous market share competition depreciates at a 40% annual rate. We also find that the products' sales are affected significantly by price, quality attributes (such as number of FDA- approved indications and number of adverse drug interactions), and order of entry into the market. ER -