|
Number of Generic Manufacturers of a Given Innovator Drug |
Number of Innovator Drugs in Category |
Avg. Rx Price, All Generic Drugs in Category |
Avg. Rx Price, All Innovator Drugs in Category |
Avg. Ratio of the Generic Price to the Innovator Price for Same Drug |
|
1 to 5 |
34 |
$23.40 |
$37.20 |
0.61 |
|
6 to 10 |
26 |
$26.40 |
$42.60 |
0.61 |
|
11 to 15 |
29 |
$20.90 |
$50.20 |
0.42 |
|
16 to 20 |
19 |
$19.90 |
$45.00 |
0.46 |
|
21 to 24 |
4 |
$11.50 |
$33.90 |
0.39 |
|
Average |
$22.40 |
$43.00 |
0.53 |
Sources: Congressional Budget Office, “How Increased Competition from Generic Drugs Has Affected Prices and Returns in the Pharmaceutical
Industry,” July 1998. Available at www.cbo.gov; “Generic Pharmaceutical Industry Anticipates Double-Digit Growth,” PR Newswire, March 17, 2004.
Available at www.Prnewswire.com; 2008 Statistical Abstract of the United States, Table 130.
ANSWER TO TRY IT! PROBLEM
The availability of economic profits will attract new firms to the jacket industry in the long run, shifting the market supply curve to the right. Entry will continue until economic profits are eliminated. The price will fall;Acme’s marginal revenue curve shifts down. The equilibrium level of economic profits in the long run is zero.
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