Entry and competition in the pharmaceutical market following patent expiry [Elektronische Ressource] : evidence from macro and micro data / vorgelegt von Silvia Appelt

ludwig-maximilians-universitat_munchen - Appelt Silvia

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Publié par	ludwig-maximilians-universitat_munchen
Publié le	01 janvier 2010
Nombre de lectures	23
Langue	English
Poids de l'ouvrage	1 Mo

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Entry and Competition in the Pharmaceutical
Market following Patent Expiry
Evidence from Macro and Micro Data
Inaugural-Dissertation
zur Erlangung des Grades
Doctor oeconomiae publicae (Dr. oec. publ.)
an der Ludwig-Maximilians-Universit at Munc hen
2010
vorgelegt von
Silvia Appelt
Referent: Prof. Dietmar Harho , Ph.D.
Korreferent: Prof. Dr. Joachim Winter
Promotionsabschlussberatung: 1. Juni 2011Fur meine Gro mutter
Helma GronbachAcknowledgements
First and foremost, I would like to thank my Ph.D. advisor Dietmar Harho for all his
support and guidance throughout my dissertation. He contributed many helpful comments
and ideas, and strongly encouraged my research endeavors. I am also thankful to Joachim
Winter and Monika Schnitzer who kindly agreed to serve as second and third reviewer on
my dissertation committee. Both of them provided a great source of advice and support.
I very much appreciate insightful discussions with friends, colleagues, and participants at
conferences and seminars. Georg von Graevenitz, Georg Gebhardt, Ernie Berndt, Ian Cock-
burn and Patrick Gaule deserve special mention for their invaluable advices and suggestions.
I am also very grateful to the Strategy and Management faculty at Boston University, in
particular Je rey Furman, for hosting me as a visiting doctoral student and inviting me to
the NBER seminars. My stay in Boston was extremely inspiring, productive and enjoyable,
also thanks to Jin Yi Zhang who was a wonderful roommate and is a close friend now.
It was a pleasure to share doctoral studies and life with Valeria Merlo, Karolin Kaiser,
Sandra Ludwig, Roland Sturz, Philip Mayrhofer, Till Stowasser, Joachim Klein, Anno Stolper,
Felix Reinshagen, Johannes Maier and Jan Schikora among many others. Special thanks go
to my roommate and good friend Christina Strassmair for making this time so joyful.
I am truly indebted and thankful to Insight Health for making their data available.
Financial support from the German Research Foundation (DFG), the University of Bavaria
e.V. and the German Academic Exchange Service (DAAD) is gratefully acknowledged.
Lastly, I would like to thank my family for all their love and encouragement. For my
parents who sparked my intellectual curiosity and supported me in all my pursuits. For my
uncle always having an open ear to my ideas, and for my \extended" family { Viola Drancoli,
Karo Hofner and Mireia Torrella { being the best friends one can wish for. Thank you.
Silvia AppeltContents
Preface 1
1 Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives
for Independent Generic Entry 9
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.2 Industry Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.3 Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.5 Empirical Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.6 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
1.8 Appendix 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
1.8.1 Brand Market Share post Generic Entry: P zer . . . . . . . . . . . . 36
1.8.2 Patent Expiry, Early Entry and Generic Entry 2002-2007 . . . . . . . 36
1.8.3 Allocation Generic Entries and Zero-Entries to Drugs . . . . . . . . . 38
1.8.4 Summary Statistics Data Set 1 . . . . . . . . . . . . . . . . . . . . . 40
1.8.5 Summary Data Set 2 . . . . . . . . . . . . . . . . . . . . . 40
1.8.6 Univariate Probit (incl. Instrument) { Coe cients . . . . . . . . . . . 41
1.8.7 Bivariate Probit (excl.t) { Coe cients . . . . . . . . . . . 42
1.8.8 Likelihood-ratio test: Restricted vs. Unrestricted Model . . . . . . . 42
1.8.9 Univariate and Bivariate Probit { Avg. Marg. E ects (All Drugs) . . 43
1.8.10 Generic Market Shares and Timing of Entry . . . . . . . . . . . . . . 43Contents ii
2 Generic Market Share Dynamics post Patent Expiry: Gauging the Impact
of Generic Price Di erentials 45
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.2 Industry Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.3 Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.4.1 Macro Data: Generic Product Panel . . . . . . . . . . . . . . . . . . 54
2.4.2 Micro Data: Patient Tracking . . . . . . . . . . . . . . . . . . . . . . 58
2.5 Macro Analysis of Generic Market Shares . . . . . . . . . . . . . . . . . . . . 61
2.5.1 Macro Analysis: Empirical Implementation . . . . . . . . . . . . . . . 61
2.5.2 Macro Results . . . . . . . . . . . . . . . . . . . . . . . . . 65
2.6 Micro Analysis of Patients’ Switching Behavior . . . . . . . . . . . . . . . . 68
2.6.1 Micro Analysis: Empirical Implementation . . . . . . . . . . . . . . . 68
2.6.2 Micro Results . . . . . . . . . . . . . . . . . . . . . . . . . 71
2.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
2.8 Appendix 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
2.8.1 Generic Price Deviations in Percentage Points . . . . . . . . . . . . . 78
2.8.2 Standard Deviation of Generic Prices over Time ine . . . . . . . . . 78
2.8.3 De ntion of Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
2.8.3.1 Generic Product Panel . . . . . . . . . . . . . . . . . . . . . 79
2.8.3.2 Patient Tracking Data . . . . . . . . . . . . . . . . . . . . . 79
2.8.4 Decomposition Standard Deviation: Generic Product Panel . . . . . . 80
2.8.5 Ordinary Least Squares and Fixed E ects { Coe cients . . . . . . . . 81
2.8.6 Univariate Probit (Two-way Clustering) { Coe cients . . . . . . . . . 82
2.8.7 Generic Price Deviations across Price Levels in % . . . . . . . . . . . 83
2.8.8 Generic Price across Price Levels ine . . . . . . . . . . . 83Contents iii
3 Generic Price Dispersion post Patent Expiry: Revisiting the Assumption
of Bertrand Competition 84
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
3.2 Industry Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
3.3 Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
3.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
3.5 Empirical Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
3.6 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
3.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
3.8 Appendix 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
3.8.1 Overview Generic Price and Generic Entry Pattern . . . . . . . . . . 114
3.8.2 Generic Entry: Drug Market vs. Bestseller Segment . . . . . . . . . . 114
3.8.3 Distribution Generic-to-Brand Price Ratios . . . . . . . . . . . . . . . 115
3.8.4 De nition of Variables: Generic Product Panel . . . . . . . . . . . . . 115
3.8.5 Decomposition Standard Deviation: Generic Product Panel . . . . . . 116
3.8.6 First Di erences { Coe cients . . . . . . . . . . . . . . . . . . . . . . 117
3.8.7 GMM First Di erences { Robustness Check . . . . . . . . . . . . . . 118
Bibliography 119List of Tables
1.1 Generic Entry Opportunities 2002{2007 . . . . . . . . . . . . . . . . . . . . . 18
1.2 Outline Data Set Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.3 De nition of Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.4 Summary Statistics Data Set 3 . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.5 Univariate Probit { Coe cients . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.6 Bivariate Probit { Coe cients . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.7 Univariate and Bivariate Probit { Average Marginal E ects . . . . . . . . . . 31
2.1 Overview Generic Drug Markets { Bestseller Segment . . . . . . . . . . . . . 56
2.2 Overview Patients and Treatments { Bestseller Segment . . . . . . . . . . . . 60
2.3 Summary Statistics { Generic Product Panel . . . . . . . . . . . . . . . . . . 64
2.4 System GMM { Coe cients . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
2.5 Summary Statistics { Patient Tracking Data . . . . . . . . . . . . . . . . . . 71
2.6 Univariate Probit { Coe cients . . . . . . . . . . . . . . . . . . . . . . . . . 72
2.7 Univariate Probit { Average Marginal E ects . . . . . . . . . . . . . . . . . 74
3.1 Overview Generic Drug Markets { Bestseller Segment . . . . . . . . . . . . . 96
3.2 Summary Statistics { Generic Product Panel . . . . . . . . . . . . . . . . . . 105
3.3 Fixed E ects { Coe cients . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
3.4 GMM First Di erences (Spec.3) { Coe cients . . . . . . . . . . . . . . . . . 109List of Figures
1.1 From Patent Application to Generic Entry . . . . . . . . . . . . . . . . . . . 13
1.2 Generic Entry in Drug Markets experiencing Early Entry . . . . . . . . . . . 33
2.1 Aggreg