Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry
Patent holders frequently attempt to mitigate the loss of monopoly power by authorizing generic entry prior to patent expiry (early entry). Competition in off-patent pharmaceutical markets may be adversely affected if early entry substantially impairs the attractiveness of subsequent market entry. I examine generic entry decisions made in the course of recent patent expiries to quantify the impact of early entry on incentives for generic entry. Using unique micro data and accounting for the endogeneity of early entry, I estimate recursive bivariate probit models of entry. Drug markets' pre-entry revenues largely determine both independent generic entry and early entry decisions. Early entry in turn has no significant impact on the likelihood of generic entry. Original drug producers appear to authorize generic entry prior to loss of exclusivity primarily fueled by rent-seeking rather than strategic entry-deterrence motives.
|Date of creation:||Apr 2010|
|Contact details of provider:|| Postal: Ludwigstr. 28, 80539 Munich, Germany|
Web page: http://www.vwl.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Reiffen & Michael R. Ward, 2005. "Generic Drug Industry Dynamics," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 37-49, February.
- Glenn Ellison & Sara Fisher Ellison, 2007.
"Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration,"
NBER Working Papers
13069, National Bureau of Economic Research, Inc.
- Glenn Ellison & Sara Fisher Ellison, 2011. "Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 1-36, February.
- Henry G. Grabowski & Margaret Kyle, 2007. "Generic competition and market exclusivity periods in pharmaceuticals," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 491-502.
- repec:adr:anecst:y:2006:i:83-84:p:10 is not listed on IDEAS
- Iván Moreno Torres & Jaume Puig & Joan-Ramon Borrell-Arqué, 2007.
"Generic entry into a regulated pharmaceutical market,"
Working Papers, Research Center on Health and Economics
1014, Department of Economics and Business, Universitat Pompeu Fabra.
- Iván Moreno Torres & Jaume Puig & Joan-Ramon Borrell-Arqué, 2007. "Generic entry into a regulated pharmaceutical market," Economics Working Papers 1014, Department of Economics and Business, Universitat Pompeu Fabra.
- Scherer, F.M., 2000. "The pharmaceutical industry," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 25, pages 1297-1336 Elsevier.
- Magazzini, Laura & Pammolli, Fabio & Riccaboni, Massimo, 2004. "Dynamic Competition in Pharmaceuticals: Patent Expiry, Generic Penetration, and Industry Structure," MPRA Paper 15968, University Library of Munich, Germany.
- Michael R. Ward & David Reiffen, 2005.
"“Branded Generics” As A Strategy To Limit Cannibalization Of Pharmaceutical Markets,"
0502, University of Texas at Arlington, Department of Economics.
- 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.
- Grabowski, Henry G & Vernon, John M, 1992. "Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 331-350, October.
- Wilde, Joachim, 2000. "Identification of multiple equation probit models with endogenous dummy regressors," Economics Letters, Elsevier, vol. 69(3), pages 309-312, December.
- Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
- Hudson, John, 2000. "Generic take-up in the pharmaceutical market following patent expiry: A multi-country study," International Review of Law and Economics, Elsevier, vol. 20(2), pages 205-221, June.
- Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management.
- 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.
- Scott Morton, Fiona M., 2000. "Barriers to entry, brand advertising, and generic entry in the US pharmaceutical industry," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1085-1104, October.
- Ramkumar Janakiraman & Shantanu Dutta & Catarina Sismeiro & Philip Stern, 2008. "Physicians' Persistence and Its Implications for Their Response to Promotion of Prescription Drugs," Management Science, INFORMS, vol. 54(6), pages 1080-1093, June.
- Papke, Leslie E. & Wooldridge, Jeffrey M., 2005. "A computational trick for delta-method standard errors," Economics Letters, Elsevier, vol. 86(3), pages 413-417, March.
- Ernst R. Berndt & Margaret Kyle & Davina Ling, 2003. "The Long Shadow of Patent Expiration. Generic Entry and Rx-to-OTC Switches," NBER Chapters, in: Scanner Data and Price Indexes, pages 229-274 National Bureau of Economic Research, Inc.
- 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.
- Andrew M. Jones & Xander Koolman & Eddy Van Doorslaer, 2006. "The impact of having supplementary private health insurance on the uses of specialists," Annals of Economics and Statistics, GENES, issue 83-84, pages 251-275.
- Atanu Saha & Henry Grabowski & Howard Birnbaum & Paul Greenberg & Oded Bizan, 2006. "Generic Competition in the US Pharmaceutical Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(1), pages 15-38.
- Hurwitz, Mark A & Caves, Richard E, 1988. "Persuasion or Information? Promotion and the Shares of Brand Name and Generic Pharmaceuticals," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 299-320, October.
When requesting a correction, please mention this item's handle: RePEc:lmu:muenec:11476. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.