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Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets

Author

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  • Ying Kong

    () (Department of Economics, The University College of Cariboo, Kamloops, BC, Canada V2C SN3. Tel.: +1-250-828-5000)

  • James R. Seldon

Abstract

This 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.

Suggested Citation

  • 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.
  • Handle: RePEc:kap:revind:v:25:y:2004:i:1:p:71-86
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    Citations

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    Cited by:

    1. Laurent Granier & Sébastien Trinquard, 2012. "Predation in off-patent drug markets," Applied Economics, Taylor & Francis Journals, vol. 44(17), pages 2171-2186, June.
    2. Brekke, Kurt R. & Canta, Chiara & Straume, Odd Rune, 2016. "Reference pricing with endogenous generic entry," Journal of Health Economics, Elsevier, vol. 50(C), pages 312-329.
    3. 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.
    4. David Reiffen & Michael R. Ward, 2007. "'Branded Generics' as a strategy to limit cannibalization of pharmaceutical markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 251-265.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. Aidan Hollis, 2005. "How do Brands’ “Own Generics” Affect Pharmaceutical Prices?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(4), pages 329-350, December.
    10. Giovanni B. Ramello, 2008. "Semiotica, diritti e mercato. Economia del marchio nel terzo millennio," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2008(1), pages 107-125.
    11. Paul Grootendorst, 2007. "Effects of 'Authorized-Generics' on Canadian Drug Prices," Social and Economic Dimensions of an Aging Population Research Papers 201, McMaster University.
    12. de Vries, A.G.B. & Pennings, H.P.G. & Block, J.H., 2013. "Trademark or patent? The effects of market structure, customer type and venture capital financing on start-ups' IP decisions," ERIM Report Series Research in Management ERS-2013-002-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    13. Ying Kong & James Seldon, 2006. "Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets: Reply," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(2), pages 189-193, March.

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