Entry and competition in generic biologics

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2007-06-01

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Abstract

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.

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10.1002/mde.1352

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Grabowski, HG, DB Ridley and KA Schulman (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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Scholars@Duke

Grabowski

Henry G. Grabowski

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 over one hundred peer reviewed articles analyzing the economics of pharmaceuticals and also several books and monograph publications. Professor Grabowski has testified several times before Congress on the issues of FDA regulation, health care reform, drug innovation and generic competition and vaccine policies. He has received numerous awards and professional recognition including a special issue of essays published in his honor in 2011 in the International Journal of the Economics of Business. He also has served as an advisor to various government and business organizations, including the National Academy of Sciences, the Institute of Medicine, the Office of Technology Assessment, the Federal Trade Commission, and the General Accounting Office. The US Congress has recognized the significant role that a paper he published with Duke colleagues David Ridley and Jeff Moe had in the passage of legislation that incentivized development of new therapies for neglected diseases through the creation of priority review vouchers.

Ridley

David Blaine Ridley

Professor of the Practice of Business Administration

David Ridley is a health economist and Dr. and Mrs. Frank A. Riddick, Jr. Research Fellow at Duke University's Fuqua School of Business. His research focuses on incentives for innovation and quality, as well as pricing. He is dedicated to creating and studying tools that improve health.

David was the lead author of two papers that became law. He and his colleagues proposed the Food and Drug Administration (FDA) priority review voucher program which became law in 2007. The vouchers provide incentives for drug development for neglected and rare diseases. The FDA has awarded more than 70 vouchers valued at about $100 million each. David and his colleagues also proposed the Environmental Protection Agency vector expedited review voucher program which became law in 2022.

David has served for more than a decade as the Faculty Director for the Center for Health Sector Management (HSM). HSM students comprise nearly 20 percent of Duke MBA graduates each year.


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