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Brand Loyalty and Generic Entry: Why do Brand‐Name Drug Companies Launch Their Own Generics?

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  • Yunyun Wan

Abstract

Facing generic competition, brand‐name drug companies sometimes launch their own generics called “authorised generics” (AGs) through a third‐party entity. If that strategy works, an AG should be launched for every branded drug that comes off patent. This, however, contradicts the fact that only a small proportion of branded drugs have had AGs. To explain this puzzle, I develop a two‐period model in which a brand‐name drug company exploits its name brand before generic entry. The model predicts that the brand‐name company launches an AG only when brand loyalty is sufficiently weak.

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  • Yunyun Wan, 2018. "Brand Loyalty and Generic Entry: Why do Brand‐Name Drug Companies Launch Their Own Generics?," The Japanese Economic Review, Japanese Economic Association, vol. 69(3), pages 340-346, September.
    • Handle: RePEc:bla:jecrev:v:69:y:2018:i:3:p:340-346
    DOI: 10.1111/jere.12189
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