Change in Patent Regime And The Role of Branded and Generic Drugs On Price and Quantity: Evidence from the Indian pharmaceutical industry 1995-2009

By Anand Nandkumar, Shantanu Dutta, Madhu Viswanathan, Arnab Choudhury

Citation

Nandkumar, Anand., Dutta, Shantanu., Viswanathan, Madhu., Choudhury, Arnab. (2024). Change in Patent Regime And The Role of Branded and Generic Drugs On Price and Quantity: Evidence from the Indian pharmaceutical industry 1995-2009 .

2024

Abstract

We explore how the strength of patents influences the mix of innovative and imitated products in a market and how such changes roll up and influence the prices and the quantity consumed in those markets. Using a natural experiment in the Indian pharmaceutical industry in which product patents were reintroduced in 18 disease categories at different points in time, we make two contributions to the literature that links the strength of patents with competition. Our study suggests that due to its effect on creating isolating mechanisms, stronger patent regimes increase the introduction of innovative products. It also stimulates imitation and increases the growth of imitated products. The net effect of such increases is that stronger patent regimes increase the market share of innovative products. Due to a preference for innovative products, despite the increase in the market share of the more expensive innovative products, both the market prices and the quantity consumed are higher after the reintroduction of product patents. Our findings thus highlight the under-appreciated fact that the effect of patent regimes on market prices and the quantity consumed is contingent upon how the product composition in a market changes and the underlying preferences for innovative versus imitated products.

Anand Nandkumar is an Associate Professor of Strategy, Executive Director of SRITNE at the Indian School of Business (ISB), and Associate Dean of the Centre for Learning and Teaching Excellence. He explores industry and firm-level phenomena that influence innovation - the generation of new ideas, and entrepreneurship - distribution and commercialisation of new ideas. His research focuses on high-technology industries such as pharmaceuticals, biotechnology, and software, and it falls in between industrial organisation (IO), economics of technological change, and strategy.

Professor Nandkumar’s current work in the innovation stream examines the effect of stronger intellectual property rights (IPR) on different aspects of innovation, such as the influence of stronger patents on long run incentives for innovation or the influence of stronger patents on the functioning of Markets for Technology (MFT). In the entrepreneurship stream, his current work examines the influence of venture capitalists on entrepreneurial performance.

Professor Nandkumar graduated with a PhD in Public Policy and Management, with a focus in strategy and entrepreneurship from Carnegie Mellon University in 2008. Prior to his PhD, he worked for 3 years with a startup in Silicon Valley, and prior to that, in New York City with one of the world’s largest financial services firms.

True to his expertise, at ISB, Professor Nandkumar teaches Strategic Innovation Management and Strategic Challenges for Innovation-based startups.

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Anand Nandkumar

Madhu Viswanathan is an Associate Professor of Marketing at the Indian School of Business (ISB). Prior to joining ISB, he served as an Assistant Professor at University of Arizona.

Professor Viswanathan’s research work focuses on the role of distribution channels, B2B relationships, and salesforce compensation, as well as, their impact on key marketing mix elements such as pricing and product assortment. His work has been published in the Journal of Marketing Research, a premier journal in the field of marketing. He has consulted for and worked with companies spanning a wide range of industries including retail, insurance, and healthcare.

Professor Viswanathan holds a PhD in Business Administration (Marketing) from the University of Minnesota, Twin Cities, and an undergraduate degree in Mechanical Engineering from BITS, Pilani.

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Madhu Viswanathan