Prior marketing literature has overlooked the role of regulatory regimes in explaining international sales growth of new products. This paper addresses this gap in the context of new pharmaceuticals (15 new molecules in 34 countries) and sheds light on the effect regulatory regimes have on new drug sales across the globe. Based on a time-varying coefficient model, we find that differences in regulation substantially contribute to cross-country variation in sales. One of the regulatory constraints investigated, i.e. manufacturer price controls, has a positive effect on drug sales. The other forms of regulation such as restrictions of physician prescription budgets and the prohibition of direct-to-consumer advertising tend to hurt sales. The effect of manufacturer price controls is similar for newly launched and mature drugs. In contrast, regulations on physician prescription budget and direct-to-consumer advertising have a differential effect for newly launched and mature drugs. While the former hurts mature drugs more, the latter has a larger effect on newly launched drugs. In addition to these regulatory effects, we find that national culture, economic wealth, introduction timing, lagged sales and competition, also affect drug sales. Our findings may be used as input by managers for international launch and sales decisions. They may also be used by public policy administrators to compare drug sales in their country to other countries and to assess the role of regulatory regimes therein.

Additional Metadata
Keywords culture, drug, economics, international new product growth, penalized splines, pharmaceutical, regulation, timevarying effects
JEL Statistical Decision Theory; Operations Research (jel C44), Government Policy; Regulation; Public Health (jel I18), Business Administration and Business Economics; Marketing; Accounting (jel M), Marketing (jel M31)
Publisher Erasmus Research Institute of Management (ERIM)
Persistent URL
Stremersch, S, & Lemmens, A. (2008). Sales Growth of New Pharmaceuticals Across the Globe: The Role of Regulatory Regimes (No. ERS-2008-026-MKT). ERIM report series research in management Erasmus Research Institute of Management. Erasmus Research Institute of Management (ERIM). Retrieved from