Working Paper: NBER ID: w20532
Authors: Lee Branstetter; Chirantan Chatterjee; Matthew J. Higgins
Abstract: 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.
Keywords: Generic Competition; Pharmaceutical Innovation; R&D; Biologics; Chemical Products
JEL Codes: D2; L5; L51; L65; M2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| More productive R&D operations (O32) | less affected by rising generic competition (L65) |
| Rising generic competition (D43) | shift in R&D focus from chemical-based products to biologic-based products (L65) |
| Generic competition (L40) | early-stage innovations (O35) |