Preferred supplier contracts in post-patent prescription drug markets

Preferred supplier contracts in post-patent prescription drug markets In recent years, the expiration of patents for large drug classes has increased the importance of post-patent drug markets. However, previous research has focused solely on patent drug markets. In this study, the authors evaluate the influence of preferred supplier contracts, the German approach to tendering, in post-patent drug markets using a hierarchical market share attraction model. The authors find that preferred supplier contracts are a powerful strategic instrument for generic manufacturers in a highly competitive environment. They quantify the effects of signing a preferred supplier contract and show that brand-name manufacturers are vulnerable to tendering. Therefore, brand-name manufacturers should readjust their strategies and consider including preferred supplier contracts in their marketing mix. In addition, the authors employ a simulation to demonstrate that a first-mover advantage might be gained from signing a preferred supplier contract. Furthermore, their results can be used as a blueprint for decision makers in the pharmaceutical industry to assess the market share effects of different contracting strategies regarding preferred supplier contracts. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Health Care Management Science Springer Journals

Preferred supplier contracts in post-patent prescription drug markets

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Publisher
Springer US
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Business and Management; Operation Research/Decision Theory; Health Administration; Health Informatics; Management; Econometrics; Business and Management, general
ISSN
1386-9620
eISSN
1572-9389
D.O.I.
10.1007/s10729-016-9362-6
Publisher site
See Article on Publisher Site

Abstract

In recent years, the expiration of patents for large drug classes has increased the importance of post-patent drug markets. However, previous research has focused solely on patent drug markets. In this study, the authors evaluate the influence of preferred supplier contracts, the German approach to tendering, in post-patent drug markets using a hierarchical market share attraction model. The authors find that preferred supplier contracts are a powerful strategic instrument for generic manufacturers in a highly competitive environment. They quantify the effects of signing a preferred supplier contract and show that brand-name manufacturers are vulnerable to tendering. Therefore, brand-name manufacturers should readjust their strategies and consider including preferred supplier contracts in their marketing mix. In addition, the authors employ a simulation to demonstrate that a first-mover advantage might be gained from signing a preferred supplier contract. Furthermore, their results can be used as a blueprint for decision makers in the pharmaceutical industry to assess the market share effects of different contracting strategies regarding preferred supplier contracts.

Journal

Health Care Management ScienceSpringer Journals

Published: Feb 22, 2016

References

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