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Scanner Data and Price Indexes$
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Robert C. Feenstra and Matthew D. Shapiro

Print publication date: 2002

Print ISBN-13: 9780226239651

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226239668.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 26 June 2022

The Long Shadow of Patent Expiration

The Long Shadow of Patent Expiration

Generic Entry and Rx-to-OTC Switches

Chapter:
(p.229) 8 The Long Shadow of Patent Expiration
Source:
Scanner Data and Price Indexes
Author(s):

Ernst R. Berndt

Margaret K. Kyle

Davina C. Ling

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226239668.003.0010

This chapter investigates the interactions of prescription versus over-the-counter (OTC) versions of the same pharmaceutical compound during the period around the patent expiration for the compound. It is hypothesized that generic manufacturers will have marketing-sales ratios close to zero, where marketing efforts consist of physician detailing and medical journal advertising. Neither Tagamet Rx nor Zantac Rx adopted a policy of competing with generics on price following patent expiration, and instead they increased prices. Although on a relative basis, the OTC introductions seem to have benefited Tagamet more than Zantac, on an absolute revenue basis over both OTC and Rx forms, Zantac gained more. Use of econometric methods in constructing price indexes that integrate the impacts of new goods needs more experimentation, perhaps with other data sets and families of products, and with specifications that include nonprice factors influencing demand functions.

Keywords:   pharmaceutical compound, patent expiration, generic manufacturers, marketing, prescription, over-the-counter, price indexes

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