Abstract : This article estimates welfare effects of accelerated generic entry via Paragraph-IV challenges. Using data from 2000-2008 for hypertension drugs in the U.S. we estimate demand using a random coefficients logit model. We find consumers gain $42 billion while producers lose $32.5 billion from entry. This modest $9.5 billion gain in social welfare is consistent with our observation that overall consumption does not increase after entry – generic sales displace branded sales, shifting surplus downstream from producers to consumers, insurance companies, and retailers. We demonstrate significant cross-molecular substitution and discuss challenges in determining what fraction of downstream surplus actually goes to consumers.
Authors’ Name : Lee G. Branstetter, Chirantan Chatterjee and Matthew Higgins
URL : http://onlinelibrary.wiley.com/journal/10.1111/%28ISSN%291756-2171
Journal : The RAND Journal of Economics
Volume, Issue, Page Numbers: forthcoming 2016
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