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KMID : 1170320080140020001
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Korean Journal of Health Economics and Policy
2008 Volume.14 No. 2 p.1 ~ p.25
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Market competition structure after original drug patent expiry
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Jung So-Won
Cho Byong-Hee
Lee Tae-Jin
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Abstract
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This thesis aims to empirically examine price changes and the level of market concentration after patent expiry in Korean pharmaceutical market. For this purpose, the drug benefit database of KNHI(Korean National Health Insurance) was analyzed during the period of January 2001 - December 2005, which contained 57 compounds first generics listed on from September 2000 to December 2002. The result of this research is as follows.
1) A certain kind of intense price competition did not occur for 3 years after patent expiry, whereas the degree of the reduction of the original, generic and weighted average prices was only in 0.1-1.4%, 0.6-2.2%, 0.3-0.7%.
2) Market expansion was observed; for 2-3 years after the patent expiry, the expenditure of the 57 compounds made larger increase in the rates (25-44%) than the average pharmaceutical expenditure (15-16%).
3) Overall, the tendency of high concentration in the market structure was maintained after patent expiry. Moreover, the compounds showed considerable variations.
4) The original prices at the time of 3, 4, 5 years after the patent expiry and the generic prices at the time of 3 years were positively correlated with the market concentration level.
Before the introduction of the new policy in 2006, market concentration was also correlated with the price changes. To be sure, further studies need to be conducted to investigate the phenomenon of market expansion after the patent expiry, the factors that stimulate the competition and the form of market competition between the relevant drugs.
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KEYWORD
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pharmaceutical market, drug price, patent expiry, market structure, HHI
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