Working Paper: NBER ID: w26194
Authors: Rena M. Conti; Ernst R. Berndt
Abstract: We establish four facts concerning competition among U.S. generic drug suppliers, using IQVIA’s National Sales Perspective™ 2004Q4 – 2016Q3 data. We define a unique product market (“molform”), consisting of the combination of a molecule active ingredient and a route of administration formulation, aggregated over different dosages and strengths. We find: (i) supply exhibits substantial churning in entrants and exits; (ii) volume-weighted use concentrates in older generic molform cohorts; (iii) the extent of competition is greatest for the oldest molform cohorts and is smallest for the youngest molform cohorts. With a median of one competitor, the extent of competition in the youngest molform cohort is very limited; and (iv) supplier-molform annual revenues are typically small, are largest for relatively young drugs, but are heavily right skewed. These four facts provide an empirical platform on which to construct and empirically evaluate hypotheses regarding generic drug market structure, performance, and possible policy reforms.
Keywords: generic drugs; competition; market structure; policy implications
JEL Codes: I10; L10; L65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| supplier entry rates (L11) | market competition (L13) |
| supplier exit rates (J63) | market competition (L13) |
| age of generic drugs (L65) | market dynamics (D49) |
| product vintage (L68) | manufacturer revenues (L14) |
| regulatory policies (G18) | entry and exit rates (J63) |