"Napsterizing" Pharmaceuticals: Access, Innovation, and Consumer Welfare

"Napsterizing" Pharmaceuticals: Access, Innovation, and Consumer Welfare

James W. Hughes, Michael J. Moore, Edward A. Snyder

NBER Working Paper No. w9229

Issued in September 2002

"...Specifically, the model yields the result that for every dollar
in consumer benefit realized from providing greater access to the
current stock, future consumers would be harmed at a rate of three
dollars in present value terms from reduced future innovation. We
obtain this result even accounting for the stylized fact that after
generic entry branded drugs continue to earn significant price premia
over generic products and hence recognizing that Napsterizing does not
completely eliminate the incentives to innovate."