Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets
AbstractThis paper examines incentives for brand-name pharmaceutical producers to market pseudo-generic versions of their own branded products upon the expiry of patent protection.Using a two-stage game model, we determine that under plausible demand and cost conditions, brand-name incumbents can find it profitable to produce pseudo-generics as a means of blocking rivals' entry even when independent firms producing true generics face low entry costs.The model shows that social welfare can be higher when firms use pseudo-generics instead of capacity for entry deterrence as long as substitutability between brand-name and generic products is sufficiently high.
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Bibliographic InfoArticle provided by Springer in its journal Review of Industrial Organization.
Volume (Year): 25 (2004)
Issue (Month): 1 (08)
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Web page: http://www.springerlink.com/link.asp?id=100336
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- Regan, Tracy L., 2008. "Generic entry, price competition, and market segmentation in the prescription drug market," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 930-948, July.
- Ying Kong, 2009. "Competition between brand-name and generics - analysis on pricing of brand-name pharmaceutical," Health Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 591-606.
- Paul Grootendorst, 2007. "Effects of 'Authorized-Generics' on Canadian Drug Prices," Social and Economic Dimensions of an Aging Population Research Papers 201, McMaster University.
- Marjit, Sugata & Kabiraj, Tarun & Dutta, Arijita, 2009. "Strategic Under-utilization of Patents and Entry Deterrence: The Case of Pharmaceutical Industry," MPRA Paper 19157, University Library of Munich, Germany.
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