Entry, Exit, and Reentry in Mature U.S. Generic Product Markets, 2004-2016

Berndt, Ernst R., Rena M. Conti and Stephen J. Murphy

Entry, Exit, and Reentry in Mature U.S. Generic Product Markets, 2004-2016

Although a vast literature exists on factors affecting the extent of generic entry in U. S. prescription drug markets following the pioneer brand’s loss of exclusivity (LOE), as well as the impact of the number of generic entrants on brand and average generic prices, almost all of this literature focuses on up to the first 24 months following initial LOE. Relatively little is known regarding exit and potential re-entry following exit in the latter stages of a product’s life cycle. However, it is widely believed that a substantial number -- estimated to be about 25% of outstanding Abbreviated New Drug Applications (“ANDAs)” approved by the U. S. Food and Drug Administration (“FDA”) -- are no longer marketed. Although manufacturers are requested to notify the FDA if they wish to have their ANDA withdrawn following discontinuation of its manufacturing and marketing, and the FDA regularly publishes a list of withdrawn ANDAs, industry observers believe the ANDAs of many discontinued drugs are not officially withdrawn. Moreover, it is possible that manufacturers might temporarily discontinue manufacturing and marketing a drug, say to update manufacturing operations, and then re-enter subsequently. Temporary discontinuation may also reflect strategic policies, e.g., keeping the option open to reenter should product market conditions improve, or to create a contestable market and discipline the pricing behavior of incumbents. In this research we focus on mature U.S. generic product markets, 2004-2016, and focus on product exit and reentry.

We define a product market by molecule-dosage form that may be manufactured or marketed by multiple suppliers, e.g., atorvastatin tablets marketed as brand Lipitor by Pfizer and as atorvastatin by numerous generic manufacturers comprise an atorvastatin oral product market. Different dosage formulations of the same molecule are treated as distinct product markets, e.g., amoxicillin oral tablets and intramuscular injectable amoxicillin are in separate product markets. The alternative formulation categories distinguishing product markets are oral solid tablets or capsules (“oral”), injectable or infusible products including suspensions (“injectables”), topical preparations, inhaled products, and “other” formulations (e.g. ocular drugs and patches) (“other”). However, the various strengths of the same molecule dosage form are considered to be in the same product market, i.e., the 10, 20, and 40 mg strengths of atorvastatin tablets marketed by numerous generic manufacturers and by Pfizer as branded Lipitor are in the same product market.

Using IQVIA (formerly QuintiulesIMS) National Sales Perspective quarterly data, we identify distinct product markets, the number of manufacturers/marketers in each product market, and any churning (entry and exit) in each product market, from Q4-2004 through Q3-2016. We distinguish brand exit from generic exit, exit from small (less than three generic manufacturers) from larger (three or more generic manufacturers) markets, and identify instances of re-entry following temporary exit. We then quantify the price (measured per standard unit) impacts of the various types of product market exit and re-entry.