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Measuring Change in the Markets for Brand-Name and Generic Drugs, 1970-2004 (WP-08-02)

Burton A. Weisbrod

Few industries have exhibited as much change as pharmaceuticals. Quantitative measurement of change in the menu of the most-dispensed pharmaceuticals can be valuable for analysis of the causes of new drug development in this increasingly-important industry. This paper presents a new measure of change, to examine the time-pattern of appearance of new drugs over the 35-year period 1970–2004, and separately for brand-name and generic drugs. Results: The number of new brand-name drugs entering the most-dispensed lists has increased substantially. Between 1970 and 1981, about 6–8 percent of all brand-name drugs on the most-dispensed list were new each year, but this increased to more than 10 percent in the past decade. The quantitative importance of new generic drugs increased even more sharply, particularly since about 1985. Conclusion: This new measure of change in the pharmaceutical industry provides a step toward understanding the process of innovation in an industry characterized by rapid change.
Burton A. Weisbrod, John Evans Professor of Economics; and Fellow, Institute for Policy Research, Northwestern University

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