"Generic Entry and the Pricing of Pharmaceuticals"
(220 K)
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NBER Working Paper No. 5306 (Also Reprint No. r2121)
Issued in May 1997
NBER Program(s): HC
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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.
Published: Journal of Economics & Management Strategy, vol. 6, no. 1, pp. 75-90 Spring 1997.
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