Entry and competition in generic biologics
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Patents for several blockbuster biological products are expected to expire soon. The Food and Drug Administration is examining whether biologies can and should be treated like pharmaceuticals with regard to generics. In contrast with pharmaceuticals, which are manufactured through chemical synthesis, biologies are manufactured through fermentation, a process that is more variable and costly. Regulators might require extensive clinical testing of generic biologies to demonstrate equivalence to the branded product. The focus of the debate on generic biologies has been on legal and health concerns, but there are important economic implications. We combine a theoretical model of generic biologies with regression estimates from generic pharmaceuticals to estimate market entry and prices in the generic biologic market. We find that generic biologies will have high fixed costs from clinical testing and from manufacturing, so there will be less entry than would be expected for generic pharmaceuticals. With fewer generic competitors, generic biologies will be relatively close in price to branded biologies. Policy makers should be prudent in estimating financial benefits of generic biologies for consumers and payers. We also examine possible government strategies to promote generic competition. Copyright © 2007 John Wiley & Sons, Ltd.
Published Version (Please cite this version)10.1002/mde.1352
Publication InfoGrabowski, HG; Ridley, DB; & Schulman, KA (2007). Entry and competition in generic biologics. Managerial and Decision Economics, 28(4-5). pp. 439-451. 10.1002/mde.1352. Retrieved from https://hdl.handle.net/10161/6616.
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Professor Emeritus of Economics
Professor Grabowski specializes in the investigation of economics in the pharmaceutical industry, government regulation of business, and the economics of innovation. His specific interests within these fields include intellectual property and generic competition issues, the effects of government policy actions, and the costs and returns to pharmaceutical R&D. He has been publishing research papers for over four decades, from his earlier work, “The Effects of Regulatory Policy on the Incentives
Professor of the Practice of Business Adminstration
David Ridley is the Faculty Director of Health Sector Management at Duke University’s Fuqua School of Business. In his research, he examines innovation and pricing in health care. David was the lead author of the paper proposing the priority review voucher program which became law in 2007 and created
Adjunct Professor in the Department of Medicine
Kevin A. Schulman, MD, MBA, is a professor of medicine and the Gregory Mario and Jeremy Mario Professor of Business Administration (2010 - 2016) at Duke University. He is a visiting professor of business administration at Harvard Business School. He holds several leadership appointments at Duke. He is an associate director of the Duke Clinical Research Institute in the School of Medicine, the country's largest academic clinical research organization. In Duke's Fuqua School of Business, he s
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