The Impact of Price Regulation on the Launch Delay of New Drugs – A Study of Twenty - Five Major Markets in the Late 1990 s Patricia

Question: This study analyzes the effect of pharmaceutical price regulation on the launch of new drugs. Obtaining regulatory approval for a price may entail administrative delay. In addition, since 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 of drugs to accepting a relatively low price, particularly for high-volume drugs that would be targets for parallel trade. However, the manufacturer’s opportunity cost of launch delay is greater, the larger the drug’s potential sales. We use IMS data to examine the effects of expected price, expected market size, country indicators, and other factors on new drug launch. Data/Methods: To focus on drugs with potentially global markets, we limit the sample to new chemical entities (NCEs) launched in the UK or US outpatient market between October, 1994 and October, 1998. There are 85 such NCEs, representing 36 therapeutic classes. The 25 countries represent the major pharmaceutical markets, including 14 EU countries. Each NCE’s expected price and market size in each country are estimated using lagged price per unit and lagged market size of competitor drugs in the same (or related) therapeutic class in Quarter 3 and Quarter 4 prior to its first worldwide launch. In addition to expected price and volume, other explanatory variables include: home country of the launch firm, a firm’s total sales at the beginning of our study period, main therapeutic class indicators, and country indicators. We use the Cox proportional hazard model to analyze the effects of these variables on the delay or nonoccurrence of launch, relative to the first launch in any country. We also test for effects of the accelerated authorization procedure introduced by the European Medicines Evaluation Agency (EMEA) in 1995. Results: There are 1,167 observed launches during our study period, or about 55% of the potential maximum. The US leads with 73 launches, followed by Germany (66) and the UK (64). Only 13 NCEs