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Health Care Management Science

, Volume 20, Issue 3, pp 419–432 | Cite as

Preferred supplier contracts in post-patent prescription drug markets

  • Carl Rudolf Blankart
  • Tom Stargardt
Article

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.

Keywords

Generic drugs Tendering Strategic behavior Pharmaceutical market Market share attraction model Rebate contract 

Notes

Acknowledgments

Financial support for this study was provided entirely by a grant from the Federal Ministry for Research and Education in Germany (grant number: BMBF 01EH1101A). The funding agreement ensured the authors’ independence in designing the study, interpreting the data, and writing and publishing the report.

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Hamburg Center for Health EconomicsUniversität HamburgHamburgGermany
  2. 2.Center for Gerontology and Health Care Research, School of Public HealthBrown UniversityProvidenceUSA

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