by Sahana Giridharan

Abstract
Drug firms have utilized a variety of strategies that contribute to rising drug prices in the U.S. for the last few years. Strategic entry timing and number of indications a drug is approved might be two factors that contribute to this rise in prices. While there have been some studies uncovering a positive relationship between generic entry and branded prices, there has been little research done on the effects of generic entry on generic prices thus far. This work can impact policy aimed at decreasing generic drug prices and increasing competition in the generic drug market. Oncology and inflammatory bowel disease (IBD) are two disease areas that have a high price burden to patients in the U.S. today, hence using Medicare Part B Average Sales Price (ASP) data, I analyze the effect of entry timing on the price of 24 drugs in these two indication areas. Using the Drugs@FDA Database, I collect data on the FDA approval date of a drug, and on the indications a drug is approved for. Utilizing OLS, my results suggest that later entry times lead to lower drug prices, with a 1 year increase in entry time resulting in a 6.99% increase in prices. Results also suggest that an increase of 1 in the number of indications a drug is approved for leads to a 49.79% decrease in drug price. This could suggest that having existing generic competitors in the pharmaceutical market decreases generic prices, and that number of indications is a strong indicator of drug price. If the current work is confirmed by future studies similar to this studying entry time and price in the generic pharmaceutical market, it is possible that future drug policy should focus on promoting competition within the pharmaceutical market to lower generic prices.

Professor Frank Sloan, Faculty Advisor
Professor Grace Kim, Faculty Advisor
Professor Kent Kimbrough, Faculty Advisor

JEL Codes: L11; I11; C3

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