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Strategic Under-utilization of Patents and Entry Deterrence: The Case of Pharmaceutical Industry

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  • Marjit, Sugata
  • Kabiraj, Tarun
  • Dutta, Arijita

Abstract

This paper seeks to explain why some pharmaceutical companies are observed to withdraw their products before patents are expired and simultaneously introduce new patented (competing) products. Given the specific nature of drug markets, the companies in fact increase the entry cost of the potential generic drug manufacturers and thereby lessen competition for new drugs. The paper determines the optimal date of withdrawing the product and studies comparative static effects of the change of parameters underlying the model.

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File URL: http://mpra.ub.uni-muenchen.de/19157/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19157.

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Date of creation: Nov 2009
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Handle: RePEc:pra:mprapa:19157

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Keywords: Patent protection; patent expiry; pharmaceutical industries; generic drugs; entry cost.;

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  1. Grossman, Gene & Lai, Edwin, 2002. "International Protection of Intellectual Property," CEPR Discussion Papers 3118, C.E.P.R. Discussion Papers.
  2. Paul Milgrom & John Roberts, 1998. "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Levine's Working Paper Archive 245, David K. Levine.
  3. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
  4. Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-65, June.
  5. Taylor, M Scott, 1994. "TRIPs, Trade, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 361-81, May.
  6. Aidan Hollis, 2005. "How do Brands’ “Own Generics” Affect Pharmaceutical Prices?," Review of Industrial Organization, Springer, vol. 27(4), pages 329-350, December.
  7. Marjit, Sugata & Beladi, Hamid, 1998. "Product Versus Process Patents: A Theoretical Approach," Journal of Policy Modeling, Elsevier, vol. 20(2), pages 193-199, April.
  8. Ying Kong & James R. Seldon, 2004. "Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets," Review of Industrial Organization, Springer, vol. 25(1), pages 71-86, 08.
  9. Deardorff, Alan V, 1992. "Welfare Effects of Global Patent Protection," Economica, London School of Economics and Political Science, vol. 59(233), pages 35-51, February.
  10. Morton I. Kamien & Israel Zang, 1999. "Virtual Patent Extension by Cannibalization," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 117-131, July.
  11. Aoki, Reiko & Prusa, Thomas J., 1993. "International standards for intellectual property protection and R & D incentives," Journal of International Economics, Elsevier, vol. 35(3-4), pages 251-273, November.
  12. Meir Statman, 1981. "The effect of patent expiration on the market position of drugs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 2(2), pages 61-66, 06.
  13. Keith E. Maskus, 1990. "Normative Concerns in the International Protection of Intellectual Property Rights," The World Economy, Wiley Blackwell, vol. 13(3), pages 387-409, 09.
  14. Aidan Hollis, 2003. "The Anti-Competitive Effects of Brand-Controlled "Pseudo- Generics" in the Canadian Pharmaceutical Market," Canadian Public Policy, University of Toronto Press, vol. 29(1), pages 21-31, March.
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