Working Paper: NBER ID: w17046
Authors: Peter J. Huckfeldt; Christopher R. Knittel
Abstract: We study the effects of generic entry on prices and utilization using both event study models that exploit the differential timing of generic entry across drug molecules and cast studies. Our analysis examines drugs treating hypertension, high blood pressure, type 2 diabetes, and depression using price and utilization data from the Medical Expenditure Panel Survey. We find that utilization of drug molecules starts decreasing in the two years prior to generic entry and continues to decrease in the years following generic entry, despite decreases in prices offered by generic versions of a drug. This decrease coincides with the market entry and increased utilization of branded reformulations of a drug going off patent. We show case study evidence that utilization patterns coincide with changes in marketing by branded drug manufacturers. While the reformulations---often extended-release versions of the patent-expiring drug---offer potential health benefits, the FDA does not require evidence that the reformulations are improvements over the previous drug in order to grant a patent. Indeed, in a number of experiments comparing the efficacies of the patent-expiring and reformulated drugs do not find statistical differences in health outcomes calling into question the patent-extension policy.
Keywords: No keywords provided
JEL Codes: I18; L11; M3; O31; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Generic entry (Y90) | Decrease in drug prices (D49) |
| Generic entry (Y90) | Decrease in drug utilization (I19) |
| Anticipation of generic competition (L49) | Decrease in utilization of original branded drugs (O39) |
| Marketing strategies (M30) | Shift in drug utilization patterns (I11) |
| Reduced advertising for original branded drugs (M37) | Increased marketing for reformulated drugs (L65) |
| Generic prices drop (D49) | Utilization patterns change (L97) |
| Health insurance types (I13) | Changes in utilization patterns (R14) |