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Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry

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  • Appelt, Silvia

Abstract

Patent holders frequently attempt to mitigate the loss of monopoly power by authorizing generic entry prior to patent expiry (early entry). Competition in off-patent pharmaceutical markets may be adversely affected if early entry substantially impairs the attractiveness of subsequent market entry. I examine generic entry decisions made in the course of recent patent expiries to quantify the impact of early entry on incentives for generic entry. Using unique micro data and accounting for the endogeneity of early entry, I estimate recursive bivariate probit models of entry. Drug markets' pre-entry revenues largely determine both independent generic entry and early entry decisions. Early entry in turn has no significant impact on the likelihood of generic entry. Original drug producers appear to authorize generic entry prior to loss of exclusivity primarily fueled by rent-seeking rather than strategic entry-deterrence motives.

Suggested Citation

  • Appelt, Silvia, 2010. "Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry," Discussion Papers in Economics 11476, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:11476
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    File URL: https://epub.ub.uni-muenchen.de/11476/1/Generic_Entry-SA.pdf
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    References listed on IDEAS

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    Cited by:

    1. WAN, Jiangyun(Yunyun), 2016. "Brand Loyalty and Generic Competition," IIR Working Paper 16-01, Institute of Innovation Research, Hitotsubashi University.
    2. Lee Branstetter & Chirantan Chatterjee & Matthew J. Higgins, 2016. "Regulation and welfare: evidence from paragraph IV generic entry in the pharmaceutical industry," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 857-890, November.
    3. Ricardo Gonçalves & Vasco Rodrigues & Hélder Vasconcelos, 2015. "Reference pricing in the presence of pseudo-generics," International Journal of Health Economics and Management, Springer, vol. 15(3), pages 281-305, September.

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    More about this item

    Keywords

    Generic Entry; Early Entry; Anticompetitive Practices;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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