Research
My research agenda is more broadly described in my research statement here, but I highlight my current research below.
Working Papers
Rewarding Incremental Innovation: Evaluating Pharmaceutical Line Extensions (Job Market Paper)
- The FDA grants three years of exclusivity for line extensions of patented drugs upon launch, which may incentivize manufacturers to delay launches. I develop and solve a dynamic supply-side model to analyze the manufacturer's optimal pricing and launch strategies, incorporating a history-dependent demand system that reflects patients' tendencies to repeat drug choices. I then evaluate alternative policies that decouple exclusivity from launch timing to examine the welfare implications of the manufacturer's strategic responses. For the case of Namenda, offering no line extension exclusivity can enhance consumer welfare, despite increasing the risk of non-development. In contrast, granting full exclusivity after the original product expires mitigates this risk but has a negligible effect on consumer welfare while significantly raising expected drug expenditures. Simulations indicate that line extensions with minor quality improvements are particularly vulnerable under a no exclusivity policy, which limits consumer welfare losses if these extensions are not developed.
How Costly are Pharmaceutical Line Extensions?
- Launching a pharamceutical line extension allows a firm to continue to earn profits, for up to 3 years after the original formulation expires, by steering patients from the original formulation to the line extension. This steering is profitable, as this steered market share is shielded from generics for the original formulation, as generic substitution laws will not apply for prescriptions of the line extension. Despite a profitable advantage for launching a line extension, many firms don't launch one. One reason is that line extensions are incremental improvements and so firms do face costs for research and development, although unlikely as costly as a novel drug. Using revenue data, I estimate a cost distribution for line extensions, by forecasting foregone profits from not launching and additional profits earned if a line extension was never launched. The recovered cost can be interpreted as a lumpsum of advertising and development costs. I find that line extensions cost on average between 430 and 570 million and using these estimates conduct back of the envelope estimates of removing exclusivity altogether.
Works in Progress
Analyzing Patient Responses to Formulary Changes (with Josh Feng and Luca Maini)
- Placing a product on a favorable drug tier is very valuable for drug manufacturers, as it leads to higher demand for their product. If a drug manufacturer is able to move to a better tier, from one year to another, all else equal, they should expect consumers to shift to their product. However, due to history dependence, patients may find a switch costly, which may limit the upside of a drug manufacturer going for a better tier. Using private claims data, we estimate demand in the insulin market for patients that are on plans that have an insulin product shift tiers between years. Preliminary results suggest that patients do predominantly shift towards the cheaper alternative, even in the presence of history dependence.
Missing out on the Hype?
- Large sneaker firms like Nike and Adidas frequently release limited quantities of coveted "Hypebeast" shoes, which are extremely popular. These shoes sell out instantly online and are often listed on shoe auction sites for substantially higher prices. Fascinatingly, these shoes clear the auctions at those inflated prices. This paper considers a model that offers an explanation as to why firms don't either increase their quantity of the product or the price to capitalize on the high demand for the product.
Common Cost Shocks - Differentiated Products, Differentiated Responses? (with Thomas Bollinger and Drew van Kuiken)
- Product variety in the grocery setting has skyrockted in recent years, as firms can target specific groups of consumers with niche products. Within a specific market, ex. Cereal, many of these firms may share a common input, but as they are all niche products, they may be impacted by cost shocks to that common input differently. Firms can respond to increased costs through higher prices or may decrease the size of their product. Given shocks to this common input, we explore how firms may respond differently through pricing and/or size decisions, based on their exposure to the common cost shock.