Generic Competition and the Incentives for Early-Stage Pharmaceutical Innovation

Branstetter, Lee; Chatterjee, Chirantan; Higgins, Matthew John

doi:10.1016/j.respol.2022.104595

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Generic Competition and the Incentives for Early-Stage Pharmaceutical Innovation

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Higgins, Matthew John
MPI for Innovation and Competition, Max Planck Society;

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https://www.nber.org/papers/w20532
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Citation

Branstetter, L., Chatterjee, C., & Higgins, M. J. (2022). Generic Competition and the Incentives for Early-Stage Pharmaceutical Innovation. Research Policy, 51(10): 104595. doi:10.1016/j.respol.2022.104595.

Cite as: https://hdl.handle.net/21.11116/0000-000E-6FC9-4

Abstract

What impact has rising generic competition had on the nature and direction of pharmaceutical innovation? We find broad-based, strong evidence that pharmaceutical companies have diverted their new drug development efforts away from therapeutic markets already well-served by generic drugs. We also find that increasing generic competition induces firms to shift their R&D activity toward more biologic-based products and away from chemical-based products. We conclude by discussing potential implications of our results for long-run innovation policy.