Abstract
We establish four facts concerning competition among US generic drug suppliers, using IQVIA’s National Sales Perspective™ 2004 Q4–2016 Q3 data. We define a unique product market (“molform”), consisting of the combination of a molecule active ingredient and a route of administration formulation, aggregated over different doses and strengths. We find: (1) supply exhibits substantial churning in entrants and exits; (2) volume-weighted use concentrates in older generic molform cohorts; (3) the extent of competition is greatest for the oldest molform cohorts and is smallest for the youngest molform cohorts. With a median of one competitor, the extent of competition in the youngest molform cohort is very limited; and (4) supplier-molform annual revenues are typically small, are largest for relatively young drugs, but are heavily right skewed. These four facts provide an empirical platform on which to construct and empirically evaluate hypotheses regarding generic drug market structure, performance, and possible policy reforms.
Acknowledgments
Research support from the National Institutes of Health, Grant R01AG043560 (Berndt), and from the American Cancer Society and the Commonwealth Fund (Conti) is gratefully acknowledged. Much of the research reported here took place when Ms. Conti was Associate Professor at the University of Chicago. Mr. Berndt and Ms. Conti acknowledge research assistance from Steven J. Murphy and Hyun Moh (John) Shin. Any opinions and findings expressed here are those of the authors, and are not necessarily those of the institutions with whom they are affiliated, the research sponsors, or the data vendor.
Notes
1 These authors use MarketScan™ retrospective claims data to examine prices and market competition for drugs classified as either single or multi-source between 2008 and 2013, excluding entry and exit of new brands, and entry of generics following the brand’s loss of exclusivity between 2008 and 2013. The data contain retail and mail-order pharmacy claims, but likely understate sales through long-term care, hospital, and federal facility channels.
2 The FDA’s Orange Book identifies the ANDA applicant, noting the actual manufacturer may differ from the ANDA applicant (also called labeler) due to manufacturing outsourcing to contract manufacturers. The ANDA applicant may differ from the marketer due to licensing actions. Our use of the term “supplier” should therefore be interpreted as the entity selling and marketing a molecule dose form.
3 Based on manufacturer-supplied data reported to the FDA, Berndt Conti, & Murphy (2018), op. cit., find that the number of net active pharmaceutical ingredient and final dose from manufacturing facilities has declined between 2013 and 2017.
4 For further discussion on contestable markets, and possible resemblance of US generic drug markets to contestable markets, see Economics Online, Contestable Markets, 2017. http://www.economicsonline.co.uk/Business_economics/Contestable_markets.html.