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Regulation effects on the adoption of new medicines

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Abstract

This paper analyses the impact of reimbursement regulation on launch times in the adoption of new medicines in a sample of OECD countries and a subsample of European countries. The latter also allows examination of price spillover effects, given that pharmaceutical product reimbursement regulation commonly benchmarks from prices in other countries. We empirically focus on the relative delays imposed by regulation on the adoption of a global set of molecules, which have diffused across more than 10 markets in the OECD over the period 1999–2008, controlling for various confounding effects. Through examining time to launch across a number of markets, and controlling for a number of confounding influences, we find that price and reimbursement regulations appear to delay the adoption of new pharmaceutical products. We also find that the existence of interdependencies in pricing may have a further indirect effect of such regulation on launch times. Firm economies of scale, the therapeutic importance of specific product innovations and market size are found to counter the delaying impact of price and reimbursement regulation on new medicines adoption.

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Notes

  1. IMS standard unit (SU) is the smallest dose for each form, for example, one tablet, one capsule, or 5 ml of liquid.

  2. ATC1 therapeutic category is the Anatomical Therapeutic Category classification code for pharmaceuticals. Each ATC category stands for a pharmaceutical substance use in a single indication within 13 general categories of use. Finer classifications exist through five levels; ATC1–ATC 5.

  3. The country set in alphabetical order is: Australia, Austria, Belgium, Canada, Finland, France, Germany, Greece, Italy, Japan, Netherlands, Poland, Portugal, South Africa, Spain, Sweden, Switzerland, Turkey, the UK and USA.

  4. We are happy to release the name of each group and product upon request.

  5. Launch in these countries therefore represents launch in the retail sector.

  6. Available at http://stats.oecd.org/index.aspx.

  7. Observations with negative sales representing products returned to the manufacturer after withdrawal from the market, and which accounted for about 5 % of the total number of observations, were dropped.

  8. Real sales figures were calculated as: Real Sales \(=\) Nominal Sales * 100/GDP deflator.

  9. We allow duration dependence parameters to be flexible and not directly account for unobserved heterogeneity (see Baker and Melino 2000).

  10. The impact of one unit change in price (p) on probability of launch (h) is computed as \(d \hbox {h}/d\hbox {p} = (d\hbox {h}/d \hbox { ln}(\hbox {p}))\cdot (d \hbox { ln}(\hbox {p})/d\hbox {p}) = (d\hbox {h}/d \hbox { ln}(\hbox {p}))\cdot (1/\hbox {p})\) which equals (the marginal effect) \(\cdot \) (1/p). Similarly, the impact of one standard deviation in price on the hazard of launch is estimated as (std dev)  \(\cdot \, \)(Marginal Effect from Regression)  \(\cdot \)  (1/p).

  11. When molecule–country fixed effects where specified, we did not find a significantly different effect in the price coefficient.

  12. The number of countries a product has launched is a proxy of quality in the sense that the treatment has managed to go through the recommendations of professional societies of different countries. However, it could well be due to differences in gaps in knowledge, yet other controls do measure such effects.

    .

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Acknowledgments

We are grateful for the financial support provided by Merck Foundation Trust, and to Tim Williams and Elizabeth Finch from Merck Sharp Dome, UK for their help during the data collection process.

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No potential conflict of interest.

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Correspondence to Joan Costa-Font.

Appendix

Appendix

See Tables 5, 6, 7.

Table 5 Robustness check: market structure and competition
Table 6 Robustness check: firm effects
Table 7 Robustness check: molecule characteristics

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Costa-Font, J., McGuire, A. & Varol, N. Regulation effects on the adoption of new medicines. Empir Econ 49, 1101–1121 (2015). https://doi.org/10.1007/s00181-014-0903-x

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