Generic Competition and the Incentives for Early-Stage Pharmaceutical Innovation
What impact has rising generic competition had on the nature and direction of pharmaceutical innovation? We find broad-based, strong evidence that pharmaceutical companies have diverted their new drug development efforts away from therapeutic markets already well-served by generic drugs. We also find that increasing generic competition induces firms to shift their R&D activity towards more biologic-based products and away from chemical-based products. We conclude by discussing potential implications of our results for long-run innovation policy.
We thank John Walsh and two anonymous referees for comments that significantly improved this paper. We also thank Tamer Abdelgawad, Anne Assmus, Iain Cockburn, Darren Filson, Carolin Haeussler, Bart Hamilton, Dietmar Harhoff, Sherry Knowles, Margaret Kyle, Jeff Macher, Joseph Mahoney, Alex Oettl, Ivan Png, Chad Syverson, and Brian Wright as well as seminar participants at the University of Illinois, University of Passau, University of California-Berkeley, Carnegie Mellon University, Ludwig Maxmilians University Munich, National University of Singapore, Washington University, India Statistical Institute (Delhi), Georgia Institute of Technology, Indian School of Business, University of Maryland, American University, Georgetown University, Boston University, University of California-Merced, Tufts University, Northwestern University, Peking University HSBC Business School, University of Utah and University of California-Los Angeles and conference participants at the NBER Productivity Conference, the USPTO Conference on Patents, Entrepreneurship and Innovation (Washington, DC), the Asia Pacific Innovation Conference (APIC) and the 2017 Hoover IP2 Conference at Stanford University for valuable comments and discussions. Programming and research assistance by Jeremy Watson, Winston Yang and Suvojyoty Saha is gratefully acknowledged. We acknowledge with gratitude IQVIA Incorporated for their generous support and access to their data. The statements, findings, conclusions, views, and opinions contained and expressed herein are not necessarily those of IQVIA Incorporated or any of its affiliated or subsidiary entities. The statements, findings, conclusions, views, and opinions contained and expressed in this article are based in part on data obtained under license from the following IQVIA Incorporated or affiliate information service(s): IQVIA Midas™, IQVIA Lifecycle™, IQVIA National Disease and Therapeutic Index™, IQVIA National Prescription Audit™, IQVIA Health Incorporated or its affiliates. Higgins acknowledges funding from The Imlay Professorship and the Sorenson Center for Discovery and Innovation. Chatterjee acknowledges IIM Bangalore from his previous academic affiliation for supporting his extended research visit to Georgia Tech. Higgins and Branstetter acknowledge funding from NSF SCISIP Grants #1064122 and #1360057. Authors are listed alphabetically and the usual disclaimers apply. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- Generics reduce early-stage innovation in their market segments; patents encourage diffusion, while price regulation...
Lee Branstetter & Chirantan Chatterjee & Matthew J. Higgins, 2022. "Generic competition and the incentives for early-stage pharmaceutical innovation," Research Policy, vol 51(10).