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LECTURE+11+-+Pharm+Econ - Lecture 11 Pharmaceutical...

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Lecture 11: Pharmaceutical Economics Health Economics 01:220:316 Prof. Derek DeLia, Ph.D.
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PHARMACEUTICAL BASICS
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Pharmaceutical products Physical product Substitute or compliment to other health services Over the counter (OTC) Prescription Major types 1. Brand name 2. Generic 3. Biologic drugs (brand/generic)
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Brand name drugs Fixed costs usually very high R&D Testing Regulatory approval Marginal costs usually very low Drug patents Exclusivity period (≈ 17 years) Monopoly power Fixed cost recovery Marketing ==> sell fast, sell often (marketing costs) Physician detailing, direct to consumer ads
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Generic drugs Substitute product (often perfect substitute) Patent expiration: Monopoly competition Price can ↓ dramatically (if enough competitors enter) Hatch-Waxman Act 1984 Bioequivalence standard 180-day marketing exclusivity for first generic Competitive mechanisms Formularies Pharmacy benefit managers (PBM’s) Auto-substitution Anti-competitive mechanisms “Pay-for-delay”
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