Varol, Nebibe
(2010)
Regulation and adoption dynamics of pharmaceutical technologies: evidence from the OECD, 1999-2008.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis examines adoption of pharmaceutical technologies across the major OECD markets during 1999-2008, a period that has witnessed substantial R&D productivity shortfalls and increasing supply-side pressure on pharmaceutical pricing. The advent of the financial crisis in 2008 has resulted in even more stringent pricing and reimbursement (P&R) regulations to contain costs and ensure value for money in pricing decisions. The central theoretical question addressed, therefore, is how price regulation affects cross-national adoption dynamics of pharmaceutical technologies. I address the impact of regulation on: i) innovative technologies, i.e. patent-protected new molecules that are central to dynamic efficiency, and ii) imitative generic technologies, i.e. lower-priced bioequivalent products that are central to static efficiency. The research in this thesis was motivated by the lack of theoretical framework or empirical evidence on the dynamics of international technology adoption in general and marked delay patterns in the adoption of pharmaceutical technologies observed in practice. It is important to understand the regulatory factors driving these delays given the profound implications of such delays on consumer and producer welfare as well as healthcare provider/payer budgets. The main hypothesis in this thesis is that price controls negatively affect adoption speed for new molecules and generics in markets that employ price controls as these controls reduce incentives to entry and result in knock-on effects in foreign markets because of linkages such as reference pricing and parallel trade. The empirical strategy adopts difference-in-difference and survival analysis using IMS data from 20 markets and controls for heterogeneity in firm and molecule characteristics. Overall findings indicate that adoption of pharmaceutical technologies is slower in price-controlled markets and that firms adapt their launch strategies to changes in pharmaceutical regulations. Expected market size is a highly significant driver of generic launch hazard, which highlights the importance of demand-side policies to promote generic use.
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