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Anti-Competitive Impact of Pseudo-Generics

Author

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  • Vasco Rodrigues

    ()

  • Ricardo Gonçalves
  • Hélder Vasconcelos

Abstract

In pharmaceuticals markets, sellers of branded drugs sometimes sell generic versions of their own branded products, either directly or through license agreements. Although claims that these pseudo-generics may have anti-competitive effects are not unusual, the theoretical literature on this issue is limited and not conclusive. This paper uses a model that combines horizontal and vertical product differentiation, to explain how those effects may occur. We show that the producer of the branded product will not sell the pseudo-generic unless faced with competition and that, if she does so, in some circumstances, all prices rise to the benefit of all sellers and the detriment of consumers. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Vasco Rodrigues & Ricardo Gonçalves & Hélder Vasconcelos, 2014. "Anti-Competitive Impact of Pseudo-Generics," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 83-98, March.
  • Handle: RePEc:kap:jincot:v:14:y:2014:i:1:p:83-98
    DOI: 10.1007/s10842-013-0154-0
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. Hay, D A, 1976. "Sequential Entry and Entry-Deterring Strategies in Spatial Competition," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 240-257, July.
    3. Laurent Granier & Sebastien Trinquard, 2010. "Entry deterrence and mergers under price competition in pharmaceutical markets," Applied Economics, Taylor & Francis Journals, vol. 42(3), pages 297-309.
    4. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    5. Michael B. Ward & Jay P. Shimshack & Jeffrey M. Perloff & J. Michael Harris, 2002. "Effects of the Private-Label Invasion in Food Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 961-973.
    6. Ying Kong & James R. Seldon, 2004. "Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(1), pages 71-86, August.
    7. Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn.
    8. Vasco Rodrigues, 2006. "Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets: Comment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(2), pages 183-187, March.
    9. Laurent Granier & Sébastien Trinquard, 2012. "Predation in off-patent drug markets," Applied Economics, Taylor & Francis Journals, vol. 44(17), pages 2171-2186, June.
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    11. Morton I. Kamien & Israel Zang, 1999. "Virtual Patent Extension by Cannibalization," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 117-131, July.
    12. Aidan Hollis, 2002. "The importance of being first: evidence from Canadian generic pharmaceuticals," Health Economics, John Wiley & Sons, Ltd., vol. 11(8), pages 723-734.
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Pseudo-generics; Product differentiation; Pharmaceutical pricing; D43; L13; L44;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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