Entry and competition in generic biologics
Article first published online: 17 AUG 2007
Copyright © 2007 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Special Issue: Economic and Policy Issues in the Pharmaceutical Industry
Volume 28, Issue 4-5, pages 439–451, June - August 2007
How to Cite
Grabowski, H. G., Ridley, D. B. and Schulman, K. A. (2007), Entry and competition in generic biologics. Manage. Decis. Econ., 28: 439–451. doi: 10.1002/mde.1352
- Issue published online: 17 AUG 2007
- Article first published online: 17 AUG 2007
Patents for several blockbuster biological products are expected to expire soon. The Food and Drug Administration is examining whether biologics can and should be treated like pharmaceuticals with regard to generics. In contrast with pharmaceuticals, which are manufactured through chemical synthesis, biologics are manufactured through fermentation, a process that is more variable and costly. Regulators might require extensive clinical testing of generic biologics to demonstrate equivalence to the branded product. The focus of the debate on generic biologics has been on legal and health concerns, but there are important economic implications. We combine a theoretical model of generic biologics with regression estimates from generic pharmaceuticals to estimate market entry and prices in the generic biologic market. We find that generic biologics will have high fixed costs from clinical testing and from manufacturing, so there will be less entry than would be expected for generic pharmaceuticals. With fewer generic competitors, generic biologics will be relatively close in price to branded biologics. Policy makers should be prudent in estimating financial benefits of generic biologics for consumers and payers. We also examine possible government strategies to promote generic competition. Copyright © 2007 John Wiley & Sons, Ltd.