Pharmaceutical Firms Research Articles

High Risk, Low Return (and Vice Versa): The Effect of Product Innovation on Firm Performance in a Transition Economy

Common wisdom suggests that high-risk strategies will be associated with high expected returns, and vice versa. Focusing on the effect of new-product development on firm performance, in this paper we argue that this relationship may reverse in a market undergoing substantial institutional transition. We examine domestic pharmaceutical firms in China during the 1990s and find that, in this context, introducing new products was associated with lower average firm profitability but higher variance. In conformity with our predictions, these relationships were stronger in areas where the rate of institutional change was higher and for product types that take longer to develop. Thus, we explain why, for particular strategic actions, high risk may be associated with low returns. A key conceptual corollary of these findings—also for strategic management research in general—is that firms may sometimes be more focused on the potential upside of their actions than on the expected value of those actions.

Insurance access and demand response: Pricing and welfare implications

We present a model in which health insurance allows liquidity-constrained patients access to otherwise unaffordable treatments. A monopolist’s profit-maximizing price for an insured treatment is greater (for any cost sharing) than it would be if the treatment was not covered. Consumer surplus may also be less. These results are based on a different mechanism than would operate in a standard moral hazard model. Our model also provides an economic rationale for the common claim that pharmaceutical firms set prices that exceed the value their products create. We show this problem is exacerbated when health insurance covers additional monopoly-provided services.

Consequences of Disclosing Clinical Trial Results: Evidence from the Food and Drug Administration Amendments Act

We examine how the U.S. Food and Drug Administration Amendments Act (FDAAA) of 2007, which requires additional disclosures regarding clinical trial results, impacts information asymmetry between the disclosing pharmaceutical firm and capital market participants, the general public, academics, and practitioners. We document a reduction in information asymmetry in capital markets. We also document an increase in adverse event and product problem complaint reports filed against the pharmaceutical firms to the FDA and a higher number of drug and medical device recalls for affected firms after the FDAAA enactment. Finally, cross-sectional analyses suggest that the increase in FDA complaint reports and recalls after the FDAAA enactment was more prominent in firms with a higher bid-ask spread decrease. Taken together, our results suggest that the FDAAA has some benefits for both investors and consumers.

Evaluating the effects of quality regulations on the pharmaceutical supply chain

This paper considers a two-echelon pharmaceutical supply chain comprising two pharmaceutical manufacturers and a pharmacy. We derive optimal decisions for three different supply chain power structures considering two scenarios: one scenario featuring quality regulation, and one without. By comparing the equilibriums of the two regulatory scenarios under different power structures, we then evaluate the effects of quality regulation and power structure on pharmaceutical firms' decisions, profits and social welfare. Our results show that the product differentiation between two pharmaceutical manufacturers will be reduced through quality regulation, serving to intensify price competition between them. This has a negative impact on the two pharmaceutical manufacturers but a positive effect on the pharmacy's profit. However, an appropriate level of minimum quality standards can enhance social welfare and the economic performance of the whole pharmaceutical supply chain, resulting in a win-win outcome. In addition, our results demonstrate that the balanced power structure has a positive effect on the pharmaceutical supply chain's economic performance and social welfare.

Effect of Financial Leverage on Firms Performance : Case of Listed Pharmaceutical Firms in Nigeria

Effect of Financial Leverage on Firms Performance : Case of Listed Pharmaceutical Firms in Nigeria

Strategic Research and Development Investment Decisions in the Pharmaceutical Industry

Do pharmaceutical firms respond to the actions of their competitors in R&D, and if so, what implications does this have for policies aimed at incentivizing drug development?

Reducing Reimbursement Drug Price Risk to Enhance R&D Incentives without Raising Drug Prices/Expenditures: Implications of Simulations Based on Questionnaire Survey of Pharmaceutical Companies in Japan

Due to severe financial conditions and unmet medical needs, the Japanese government must prioritize both R&D incentives and drug prices/expenditures. However, increasing reimbursement drug prices to strengthen R&D incentives also increases the financial burden on patients and the National Health Insurance, wherein virtually all prescription drugs are reimbursed, with prices determined and controlled by the government. Hence, it is important to find ways to achieve higher R&D incentives without raising drug prices/expenditures. To seek such policies, we focus on the reimbursement drug price risk of pharmaceutical firms. An original questionnaire survey is used to collect data on the price-risk attitudes of R&D-oriented pharmaceutical firms in Japan. With this data, we conduct numerical simulations to quantify the effect of reducing the reimbursement drug price risk on firms’ R&D incentives. Then, we check the robustness of our results. We find that many R&D-oriented pharmaceutical firms in Japan are risk averse. Thus, to enhance R&D incentives, reducing price risk is effective. The simulated impact of removing a ±10% price risk is equivalent to winning a 5% premium, which is substantial. These results are robust to changes in utility form, price/sales patterns and market size, while increased price risk enhances the simulated impact.

Innovation and growth in the UK pharmaceuticals: the case of product and marketing introductions

New drug introductions are key to growth for pharmaceutical firms. However, not all innovations are the same and they may have differential effects that vary by firm size. We use quarterly sales data on UK pharmaceuticals in a dynamic panel model to estimate the impact of product (new drugs) and marketing (additional pack varieties) innovations within a therapeutic class on a firm’s business unit growth. We find that product innovations lead to substantial growth in both the short and long run, whereas a new pack variety only produces short-term effects. The strategies are substitutes but the marginal effects are larger for product innovations relative to additional packs, and the effects are larger for smaller business units. Nonetheless, pack introductions offer a viable short-term growth strategy, especially for small- and medium-sized businesses.

Technological innovations and firms’ productivity in new patent regime: Evidences from Indian pharmaceutical industry

Innovative firms enjoy more market benefits by conducting both technological (product and process) and nontechnological (organizational and marketing) innovations. This study aims to examine the relationship between technological innovations and firms’ productivity in Indian pharmaceutical industry in new patent regime. In particular, we analyze the direct impact of product and process innovation on the productivity of 168 Indian pharmaceutical firms over 2000–2013. Findings of this study reveal that technological innovations are positive source of firms’ productivity. However, this relationship varies with types of technological innovations and also ownership structure of firms. Moreover, this study also finds that the impact of technological innovation is stronger for multinational enterprises.

The value of innovation and the spillover effect on alliance partners

This paper investigates the value of innovation for pharmaceutical firms and their strategic alliance partners. Rather than relying on the standard patent data to measure innovation success, we use a comprehensive data set on drug approvals by the United States Food and Drug Administration to examine the value of innovation for the drug companies and their alliance partners. In examining FDA approvals with different levels of innovation significance, our evidence shows that shareholders of the innovating firm and its alliance partners both benefit significantly from announcements of radical innovation. Furthermore, young, newly-public alliance partners with strong growth opportunities experience stronger spillover effects from radical innovation. More recently formed alliances are also associated with more significant spillover effects on alliance partners. Exploring the potential downside of alliance partnerships, we find that adverse events such as FDA warning letters or drug withdrawals cause significant wealth loss to the drug manufacturers, with some negative spillover effects on the firms’ alliance partners.

Эффективность реамберина в коррекции процессов перекисного окисления липидов в плазме крови больных эпилепсией детей

The antioxidant activity of reamberin was studied in children with epilepsy: 10 patients with epilepsy received intravenous reamberin (Research and Technological Pharmaceutical Firm POLYSAN, Saint Petersburg, Russia) 200 ml of 1,5 % infusion solution at a rate of 40-80 drops/min (2-4 ml/min) once daily for 5 days; 15 patients with epilepsy received only valporic acid (a control group). The efficacy of the medication was evaluated by the levels of lipid hydroperoxides, conjugated dienes, and malondialdehyde and by the activity of the main components of the antioxidant system (ceruloplasmin, vitamin E, catalase) in the blood of epileptic children. The administration of reamberin to patients with epilepsy significantly reduced the plasma levels of lipid hydroperoxides by 15 %, conjugated dienes by 15 %, and malondialdehyde by 24 % compared to the patients in the control group. An analysis of the effect of succinate-containing medications on the activity of the antioxidant system components revealed that the blood concentrations of ceruloplasmin and catalase were 37 % and 24 %, respectively, higher than those in the control group. Thus, the inclusion of reamberin into the treatment of children with epilepsy should be considered pathogenically justified, clinically reasonable, and promising.

Pharmaceutical Product Liability and the Propensity to Patent: An Empirical Firm-Level Investigation

Do different pharmaceutical product liability regimes in different countries induce innovation or can they lead to potentially socially undesirable outcomes? We exploit the variation in pharmaceutical liability and litigation rules across firms in pharmaceutical industry and countries to explain the firm-level propensity to innovate. Drawing on a large dataset from European Patent Office (EPO) covering over 9.950 pharmaceutical patents from 63 countries over the period 1991-2015, we compute the conditional probabilities of individual pharmaceutical firms to acquire a valid based patent on the validation outcomes and examine whether different liability regimes encourage or deter firm-level innovation. Our empirical strategy addresses firm-level idiosyncrasies, country-level unobserved effects and common technology shocks that potentially invoke omitted variable bias in the effects of liability regimes on the propensity to patent. Our investigation reveals that liability regimes combined with damage caps, broad statutory excuses and reversed burden of proof have a strong positive effect on the firm-level patent stock and a negative effect upon EPO patent validation rate. The evidence suggests that not all liability rules and related litigation procedures are created equal. Firms are systematically more likely to hold valid patents at the EPO when the liability and litigation rules are not complex and when the damage cap, broad statutory excuses and reversed burden of proof are introduced.

When one door closes, another door opens … for some: Evidence from the post‐TRIPS Indian pharmaceutical industry

AbstractResearch SummaryFirms' strategy choices are contextually dependent, yet internally delimited. A radical shift in institutional context forces firms to reevaluate the desirability and suitability of current strategies and assess the potential of new strategic opportunities. From 1970 to 1995, the Indian pharmaceutical industry operated under a process‐focused intellectual property regime and enjoyed legal protection to reverse engineer brand name drugs. In 1995, this protection ended with the introduction of the trade‐related aspects of intellectual property rights (TRIPS) Act. We examine the innovation response of Indian pharmaceutical firms in light of this regime shift focusing on the underlying internal factors influencing firms' strategic choices. We find that the scope and balance of firms' knowledge bases, which set capabilities and influence decision framing, dictate firms' innovative response. We further document how firms' strategic choices contribute to firm financial performance and the reshaping of the Indian pharmaceutical industry.Managerial SummaryFrom 1970 to 1995, the Indian pharmaceutical industry operated under a process‐focused intellectual property regime and enjoyed legal protection to reverse engineer brand name drugs. Following TRIPS in 1995, the intellectual property regime in India became stronger, with product patent enforcement being recognized. Indian pharmaceutical firms had to make strategic choices on the kind of innovation they would pursue under this new IP regime. This article shows that having broad and nonspecialized knowledge assets allowed firms to pursue the most novel innovation and engage in new product development. Having T‐shaped assets, that is, broad knowledge scope yet narrowly focused knowledge expertise, allowed firms to pursue process‐based innovation in areas close to their existing areas of expertise but not necessarily engage in new product development. The findings of this article shed light on what kind of knowledge base and workforce allows firms to adjust to technological and contextual changes.

Analysis of the Relationship between Responsible Supply Chain Management and Social Performance

Responsible supply chain management (RSCM) as a growing sub-field of supply chain management (SCM) has gathered increasing consideration from both practitioners and academics for the past two decades. Even though manufacturing firms have implemented RSCM behaviors throughout this period, there exist some concerns as to whether these RSCM behaviors are being applied for the effect they have on social performance outcomes. In recent times, various debates have been opened concerning this RSCM paradox, throwing doubt on whether an investment in the implementation of RSCM behaviors certainly comes with a corresponding social and safety performance outcomes and, therefore, the commercial benefits of responsibility management in the context of SCM remain open for interrogation. This study aims to explore the impact of responsible supply chain management behaviors on social performance among pharmaceutical companies in China. And also, investigate the intervening roles of process innovation (PI) and supply chain integration (SCI) as mediating and moderating constructs, respectively. The research hypothesis was formulated following an extensive study of relevant literature and was based on resource and capability-based theories such as the resource-based view, the natural resource-based view, and the stakeholder theories. The design of the study was descriptive with a confirmatory reach, applied to 123 Chinese pharmaceutical firms selected across Jiangsu, Shanghai, Zhejiang, and Guangdong provinces. The proposed theoretical model was tested using partial least squares structural equation modeling (PLS-SEM). The empirical findings of the study confirmed that a practical application of RSCM behaviors, process innovation, and supply chain integration initiatives positively and significantly improves social performance outcomes. This confirms the position of existing literature that there is a positive relationship between RSCM behaviors and social performance. It also validated the belief that process innovation and supply chain integration positively mediates and moderates the relationship between RSCM and social performance, respectively. Therefore, the findings herein can be considered as complementary to the existing body of knowledge in the field. The practical implications derived from this study will contribute to sustainable development and expand knowledge both in industry and in academia.

Regionalization of R&D activities: (Dis)economies of interdependence and inventive performance

Abstract This paper examines the impact of the extent of the regionalization of MNEs’ R&D activities on their inventive performance. By joining the regionalization theory with the recombinant view of invention, we challenge the implicit assumption that all foreign knowledge-seeking activities will necessarily offer new knowledge to the firm. We introduce the (dis)economies of interdependence, defined as the (dis)advantages that the firm derives due to the interdependence among countries within a region, as a new theoretical mechanism explaining the benefits and costs of regionalization. Our analysis of global pharmaceutical firms shows that an inverted U-shaped relationship exists between the number of regions in which a firm has R&D activities and its inventive performance. Our results also indicate that a firm’s recombinant capability moderates the inverted U-shaped relationship in such a way that, when a firm’s recombinant capability is high, it reaches its turning point in a larger number of regions and the inverted U-shaped relationship is flatter. These results underscore that recombinant capability significantly influences the firm’s ability to derive benefits and reduce costs from the regionalization of its R&D activities. Our findings suggest that it is through the consideration of the (dis)economies of interdependence that offers the essential reasoning needed to unwind the inferred assumption that all foreign knowledge-seeking activities will offer access to new knowledge.

Effects of product imitation on customer equity

PurposeThe aim of this study is to investigate the differential effects of pure and creative imitation on customer equity and the moderating roles of market contingency (i.e. competition intensity) and institutional contingency (i.e. enforcement inefficiency).Design/methodology/approachA lab experiment with 181 subjects and a survey of both senior and middle managers from 149 pharmaceutical firms in China were conducted.FindingsPure imitation decreases customer equity, but creative imitation increases it. Competition intensity attenuates the negative effect of pure imitation and the positive effect of creative imitation, whereas enforcement inefficiency only attenuates the negative effect of pure imitation.Practical implicationsThe findings have significant implications for managers seeking to implement product imitation strategies in emerging economies. They can help managers understand the effects of two kinds of imitation strategies on customer equity. Furthermore, this shows that product imitation strategies should be aligned with various market and institutional contingencies to achieve better performance.Originality/valueThe authors distinguished between pure and creative imitation. Whereas previous studies have investigated the effects of pure and creative imitation on financial and market performance, the focus was on their differential effects on customer equity and the moderating roles of environmental contingencies at the market and institutional levels.

Regulating Conflicts of Interest Through Public Disclosure: Evidence From a Physician Payments Sunshine Law

Hospital and health care administrators have often named prescription drug costs as one of their largest cost problems. Relatedly, a significant body of research demonstrates that meals and honoraria from pharmaceutical firms to physicians leads to higher prescribing of expensive, brand name drugs. Some administrators and scholars have advocated for mandatory disclosure of these payments in order to reduce this conflict of interest, but many practitioners believe disclosure has little effect on prescribing. This paper uses a quasi-experiment of a 2009 payment disclosure policy in Massachusetts to estimate the causal impact of public disclosure on prescribing. The comprehensive dataset includes all retail prescriptions for 262 drugs in 9 drug classes written by 5730 physicians in five states over 48 months. We show a significant post-disclosure reduction in brand name drug prescriptions by Massachusetts physicians, relative to control doctors in other states. These effects are driven by heavy prescribers of brand name drugs in the pre-policy period, particularly for drugs with large pre-policy sales forces. Effects are also detected before the first data were released, implying that the effects are not because patients or administrators responded to the disclosed payments. Instead, some physicians may have reduced payments after disclosure is mandated, leading to changes in their prescriptions. Taken in tandem with the many studies showing that industry payments influence prescribing, this study suggests a strong role for mandatory public disclosure in reducing conflicts of interest in medicine and costly prescribing of brand name drugs.

Influence of Responsible Supply Chain Management Behaviours and Environmental Performance among Pharmaceutical Companies in China

Responsible supply chain management (RSCM) as a growing sub-field of supply chain management (SCM) has gathered increasing consideration from both practitioners and academics for the past two decades. Even though manufacturing firms have implemented RSCM behaviors through this period, there exist, some concerns as to whether these RSCM behaviors are being applied for the effect they have on environmental performance. In recent times, various debates have been opened concerning this RSCM paradox, throwing doubt on whether an investment in the implementation of RSCM behaviors certainly comes with a corresponding environmental performance outcome and, therefore, the commercial benefits of responsibility management in the context of SCM remain open for interrogation. The aim of this study is to explore the impact of responsible supply chain management behaviors on environmental performance among pharmaceutical companies in China. In addition, investigate the intervening roles of process innovation and supply chain integration as mediating and moderating constructs respectively. The research hypothesis were formulated following an extensive study of relevant literature and were based on resource and capability-based theories such as the resource based view, the natural resource based view and the stakeholder theories. The design of the study was explanatory with a confirmatory reach, applied to 123 Chinese pharmaceutical firms selected across, Jiangsu, Shanghai, Zhejiang and Guangdong provinces. The proposed theoretical model was tested using partial least squares structural equation modelling (PLS-SEM). The empirical findings of the study confirmed that an effective application of RSCM behaviors, process innovation(PI), and supply chain integration(SCI) initiatives positively and significantly improves environmental performance outcomes. This confirms the position of extant literature that there is a positive relationship between RSCM behaviors’ and environmental performance. It also validated the position that process innovation and supply chain integration positively mediates and moderates respectively the relationship between RSCM and environmental performance. Therefore, the findings herein can be considered as complementary to the existing body of knowledge in the field. The practical implications derived from this study will contribute to sustainable development and expand knowledge both in industry and in academia

The Impact of Interactional Justice and Supply-Chain Collaboration on Sustainable SCM Performance: The Case of Multinational Pharmaceutical Firms

This study explored the impact of interactional justice on supply-chain collaboration and sustainable supply-chain performance. Accordingly, it classified interactional justice of supply-chain management (SCM) into interpersonal and informational justice, and empirically classified the effects of these subordinate concepts on supply-chain collaboration and sustainable supply-chain performance. To this end, 700 questionnaires were distributed, and 201 final valid responses were used for the statistical analysis which revealed the significant positive influence of interpersonal justice on informational justice. This indicates that courtesy, respect, and proper words are important in the relationship between buyers and sellers. Both interpersonal and informational justice had a significant positive relationship with supply-chain collaboration. The results suggest that a fair-trade environment should be cultivated to encourage and facilitate seller-buyer collaboration. Lastly, supply-chain collaboration had a positive influence on sustainable supply-chain performance. This implies that if justice is not perceived in the seller-buyer relationship, collaboration can be hindered, which negatively impacts corporate performance. These findings also helped to understand the importance of interactional justice and to propose a new relationship between interpersonal and informational justice.

Economic and Social Effects of Parallel Importation of Pharmaceutical Products on Organisational Performance in Pharmaceutical Firms in Kenya

The purpose of this paper is to analyse the effect of parallel importation of pharmaceutical products on the organisational performance of pharmaceutical firms in Kenya. The paper is guided by research objectives that are focused on: the economic effects of parallel importation of pharmaceutical products on organisational performance and the social effects of parallel importation of pharmaceutical products on organisational performance. This paper concludes that the issue of economic and social effects of parallel importation and how they affect the organizational performance of pharmaceutical companies in Kenya is rich for exploration and recommends that a study be conducted focusing on parallel importation and organizational performance of pharmaceutical companies; especially now that a clear legal framework on parallel importation has been put in place.