Economics of the Pharmaceutical Industry
The impact of price regulation on the launch delay of new drugs—evidence from twenty-five major markets in the 1990s
Article first published online: 2 SEP 2004
Copyright © 2004 John Wiley & Sons, Ltd.
Volume 14, Issue 3, pages 269–292, March 2005
How to Cite
Danzon, P. M., Wang, Y. R. and Wang, L. (2005), The impact of price regulation on the launch delay of new drugs—evidence from twenty-five major markets in the 1990s. Health Econ., 14: 269–292. doi: 10.1002/hec.931
- Issue published online: 15 FEB 2005
- Article first published online: 2 SEP 2004
- Manuscript Accepted: 17 MAR 2004
- Manuscript Received: 11 NOV 2002
- new chemical entity (NCE);
- new drug launch;
- pharmaceutical price regulation;
- parallel trade;
- external reference pricing
We analyze the effect of price regulation on delays in launch of new drugs. Because a low price in one market may ‘spill-over’ to other markets, through parallel trade and external referencing, manufacturers may rationally prefer longer delay or non-launch to accepting a relatively low price. We analyze the launch in 25 major markets, including 14 EU countries, of 85 new chemical entities (NCEs) launched between 1994 and 1998. Each NCE's expected price and market size in a country are estimated using lagged average price and market size of other drugs in the same (or related) therapeutic class. We estimate a Cox proportional hazard model of launch in each country, relative to first global launch.
Only 55% of the potential launches occur. The US leads with 73 launches, followed by Germany (66) and the UK (64). Only 13 NCEs are launched in Japan, 26 in Portugal and 28 in New Zealand. The results indicate that countries with lower expected prices or smaller expected market size have fewer launches and longer launch delays, controlling for per capita income and other country and firm characteristics. Controlling for expected price and volume, country effects for the likely parallel export countries are significantly negative. Copyright © 2004 John Wiley & Sons, Ltd.