Strategic Pricing of New Pharmaceuticals

Lu, Zhanni; Comanor, William S.

doi:10.1162/003465398557212

Cited by 192 publications

(130 citation statements)

References 13 publications

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“…For example, John Lu and William Comanor found that introductory prices for drugs that represented an important therapeutic gain were two to three times higher than prices for drugs that were used for similar purposes. 6 However, given the claim that longer development times lead to higher drug prices and the close attention paid by policymakers to drugs' affordability, a closer look at development times is warranted.…”

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confidence: 99%

Are Development Times For Pharmaceuticals Increasing Or Decreasing?

2006

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This study examines trends in drug development times. Longer clinical trial times have been described as one factor leading to higher drug prices. Previous reports on development times have been based on proprietary data. We examined trends in development times for 168 drugs with data collected from publicly available sources. T r e n d s i n t h e regulatory review period of drugs over time have been extensively examined, because public data are available for this phase. 1 However, information on clinical trial periods is mainly based on proprietary data supplied by the pharmaceutical industry that are unavailable to the public, or on duration models based on data supplied by industry news and intelligence services. This prior work suggests that clinical trial time has been decreasing. 2 Our examination of development time adds to the earlier work in the area; we were able to reveal data on individual drugs, analyze development times by various drug characteristics, and examine trends in ways that have not been published before, mainly because we were not limited by proprietary agreements with industry. In addition, we used government-verified development dates on approved drugs, not proprietary data, to examine trends.Development time is important because of numerous claims that it is a factor in drug pricing. The pharmaceutical industry argues that long drug development times lead to high drug prices, and it identifies increasingly longer clinical trial periods as an important factor. 3Long development times presumably lead to higher opportunity costs of capital and higher research and development (R&D) costs. It has also been suggested that decreases in development time can have a substantial downward effect on these costs. 4 The claim that longer development times lead to high drug prices suggests that drug pricing is based on costs. In other words, high R&D costs lead to higher drug prices, and current prices are necessary to fund future R&D spending.

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confidence: 99%

Are Development Times For Pharmaceuticals Increasing Or Decreasing?

2006

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“…12 The profile is a step-function for a given drug, but due to the variation in effective patent lives, aggregation implies a close to continuous function. Although the age-imitation probability profile shown in Figure 2 is rather noisy, it indicates that within-patent competition is fairly limited, especially when compared to between-patent entry documented in later sections.…”

Section: Within-patent Entrymentioning

confidence: 99%

“…However, as all drugs observed had effective patent lengths below 18 years, when the entry probability is slightly larger than a half, the average probability of within patent competition at the time of patent expiration is below a half. 12 Due to the censoring of approval dates prior to 1982 in The Orange Book , we cannot compute the proportion by single year of…”

Section: Within-patent Entrymentioning

confidence: 99%

The Dual Effects of Intellectual Property Regulations: Within‐ and Between‐Patent Competition in the U.S. Pharmaceuticals Industry

Lichtenberg

Philipson

2002

The Journal of Law and Economics

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A patent only protects an innovator from others producing the same product, but it does not protect him from others producing better products under new patents. Therefore, one may divide up the source of competition facing an innovator into within-patent competition, which results from production of the same product, and betweenpatent competition, which results from production of products on other patents. Previous theoretical and empirical micro -based analyses have emphasized the effects of intellectual property regulations on within -patent competition by showing how protecting innovative returns from imitators raises R&D incentives. However, between-patent competition affects innovative returns, particularly through creative destruction in the many high-tech industries that seem central to overall economic progress. This suggests that a fuller understanding of IP-regulations take into account its effects on between-patent competition. We find that the total effects of intellectual property regulations depend heavily on whether these unexplored effects are present. We attempt to estimate the relative magnitudes of the two sources of competition in limiting innovative returns in the U.S. pharmaceuticals market. In this market within -patent competition from so-called generic producers has been analyzed relatively more compared to competition between-patents through so called therapeutic competition. We estimate that between-patent competition, most of which occurs while a drug is under patent, costs the innovator at least as much as within-patent competition, which cannot occur until a drug is off patent. The reduction in the present discounted value of the innovator's return from between-patent competition appears to be at least as large as the reduction from competition within -patents, and may be much larger.

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“…The patent institution creates a trade-off between static and dynamic efficiency, and most studies relate to the consequences of the incentives for pricing and use. A study by Lou and Commanor in the US showed that launch prices for new drugs were related to therapeutic value (Lu and Comanor, 1998). Also in the Swedish markets with price control on pharmaceutical, initial pricing is related to value (Ekelund and Persson, 2003).…”

Section: Introductionmentioning

confidence: 99%

Valuing new medicines in the early 21:st century

Carlsson

2017

Nordic J Health Eco

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Abstract:What is the actual value of new medicines? The answer to this question is the key to rational use of new technologies in health care and for design of appropriate incentives for innovation. In this paper we present methods, data and study results for valuing new medical technologies in a life cycle perspective, relevant for development of a new approach to contract and payment for innovation that can replace present systems for pricing and reimbursement. Focus is on value in clinical practice, and on the data needs and methods needed for the development of outcome-based payment systems that balances risks and rewards for innovation in health care. We provide an overview of studies from the Swedish context on the value of new medicines introduced in the treatment of diabetes, cancer, cardiovascular disease and rheumatoid arthritis. These studies using national health data and quality registers emphasise the importance of continuing efforts to collect relevant data for assessment of value after a medicine reaches the market and starts to be used in clinical practice. It is only when medicines are used in clinical practice that the benefits for real-world patient populations can be identified, measured and valued. Analyses of real-world data will also assist further development and tailoring of treatment strategies to optimize the value of the new technology. While an effective patent system rewards innovation for a limited period of time, many innovations may continue to provide value to society long after patent protection, and these values must be included in the assessment of value of innovation. JEL classification: I11, O32, O33

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Strategic Pricing of New Pharmaceuticals

Cited by 192 publications

References 13 publications

Are Development Times For Pharmaceuticals Increasing Or Decreasing?

Are Development Times For Pharmaceuticals Increasing Or Decreasing?

The Dual Effects of Intellectual Property Regulations: Within‐ and Between‐Patent Competition in the U.S. Pharmaceuticals Industry

Valuing new medicines in the early 21:st century

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