Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets
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.
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