Time Release: The Effect of Patent Expiration on U.S. Drug Prices, Marketing, and Utilization by the Public

Publication Date: October 2009

Publisher: Manhattan Institute for Policy Research. Center for Civic Innovation

Author(s): Frank L. Lichtenberg; Gautier Duflos

Research Area: Health; Manufacturing and industry

Keywords: drug prices; prescription drugs; drug patents; patent expiration

Type: Report

Coverage: United States

Abstract:

The Manhattan Institute released a new report coauthored by Frank Lichtenberg and Gautier Duflos. This study is based on data on nearly all prescription drugs sold in the United States and examines the impact of the expiration of drug patents on U.S. drug prices, marketing, and the quantity of drugs consumed. After patents expire and generic competition slashes drug prices, the authors find that drug utilization remains essentially unchanged. Prices undoubtedly affect utilization, but companies' marketing efforts on behalf of branded drugs also help ensure widespread utilization. When patents expire, both marketing and prices fall by about 60%, resulting in no net increase in utilization.