Information, marketing, and pricing in the U.S. antiulcer drug market.

Abstract

Introduced into the United States in 1977, Tagamet was the pioneer product in the class of antiulcer drugs known as H2antagonists. By promoting ulcer healing through inhibiting acid secretion, Tagamet was able to heal ulcers and treat pre-ulcer conditions pharmacologically on an outpatient basis, thereby substituting for more costly hospital admissions and surgeries. In 1983 another H2-antagonist called Zantac entered, and by early 1987 U.S. Zantac sales surpassed those of the pioneering Tagamet. Today there are four H2-antagonists sold in the United States: Tagamet, Zantac, Pepcid, and Axid. Zantac is now the world's largest selling prescription drug, having estimated worldwide sales in 1994 of about $4 billion. Each of the four H2-antagonists is among the top 100 in world drug sales, although Tagamet lost U.S. patent protection on May 17, 1994. In this paper we examine empirically the role of information in facilitating and explaining growth of the overall antiulcer drug market, as well as in shaping the changing market shares of the four patented products. The dissemination of information is due largely to the use of marketing channels, such as visits by manufacturers' representatives to physicians (called detailing), advertising in medical journals, and most recently, by direct-to-consumer advertising. We examine these and also explore pricing policies, product differentiation, and orderof-entry effects.

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