Spillovers and Other Externalities in Pharmaceutical Marketing - Innovation and Marketing in the Pharmaceutical Industry - page 666

function for each patient-physician pair, vary the weight placed on the input
provided by the patient, and develop forecasts for the sales of ethical drugs.
The third feature that distinguishes the pharmaceutical setting is the variation in the
regulation of marketing activities across different segments or even geographical
regions. For instance, there is variation in how the US and Canadian regulatory authori-
ties treat DTCA (more on this in a subsequent section). Analogously, price regulation
differs across countries; some countries (such as France, Italy, and Japan) have direct
price controls—i.e., they set the magnitude of the price ceiling. Other countries, such as
Germany, the Netherlands, and New Zealand, however, use reference prices to set the
limits on reimbursement. In this latter system, a manufacturer may charge a price above
the reference price, and it is the patient (and not the government) who must pay the
excess portion above the reimbursement limit (see e.g., Danzon and Keuffel 2007 ;
Chintagunta and Desiraju 2005 ; Stremersch and Lemmens 2009 ).
Having outlined the unique features of the pharmaceutical setting, we now
provide a brief summary of the research—mainly from marketing—that has examined
spillovers and other related externalities. Later in the chapter we review this research
in more detail, and note the role of the above unique features in highlighting
spillovers that will benefit from further research attention.

23.1.3 A Brief Summary of Extant Research

Any analysis of spillovers needs to accommodate the following issues: the substantive
contexts in which spillovers are likely to be relevant, the underlying (possibly
theoretical) mechanisms by which spillovers arise in practice, and the consequences
of spillovers, which are popularly referred to as the “spillover effects.” We now
summarize each of these issues in turn.
An inspection of previous research reveals that a variety of marketing settings
seem conducive for spillovers to arise: (1) brand extensions either within a given
product category or across different categories; (2) when a firm's marketing
communications focus only on a subset of a given product's attributes; (3) organi-
zational structure that involves multiple agents who put forth marketing efforts on
behalf of that firm or a subset of its brands; (4) brand alliances, R&D alliances, and
co-marketing alliances that involve partnerships among firms; (5) sequential entry
of products into a given market either within a category or across categories; (6) the
launch and takeoff of a product in multiple international markets; and (7) multi-
market competition among brands or firms.
Given the above relatively broad assortment of settings where spillovers may arise,
we find it convenient to group the extant research along three dimensions: (1) whether
the focal firm (or brand) is examined in isolation or in the context of competing firms/
brands; (2) whether the analysis is conducted in the context of a single category or
across product categories; and (3) whether the examined products are all available
concurrently or sequentially. This grouping allows us to generate (at least) a partial
taxonomy—that is outlined below and consolidated in Table 23.1 , which also includes
citations to representative research—for the various types of spillovers.