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Strategic Under-utilization of Patents and Entry Deterrence: The Case of Pharmaceutical Industry

  • Marjit, Sugata
  • Kabiraj, Tarun
  • Dutta, Arijita

This paper seeks to explain why some pharmaceutical companies are observed to withdraw their products before patents are expired and simultaneously introduce new patented (competing) products. Given the specific nature of drug markets, the companies in fact increase the entry cost of the potential generic drug manufacturers and thereby lessen competition for new drugs. The paper determines the optimal date of withdrawing the product and studies comparative static effects of the change of parameters underlying the model.

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File URL: http://mpra.ub.uni-muenchen.de/19157/1/MPRA_paper_19157.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19157.

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Date of creation: Nov 2009
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Handle: RePEc:pra:mprapa:19157
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  1. 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.
  2. Jean O. Lanjouw, 1998. "The Introduction of Pharmaceutical Product Patents in India: "Heartless Exploitation of the Poor and Suffering"?," NBER Working Papers 6366, National Bureau of Economic Research, Inc.
  3. Deardorff, Alan V, 1992. "Welfare Effects of Global Patent Protection," Economica, London School of Economics and Political Science, vol. 59(233), pages 35-51, February.
  4. Marjit, Sugata & Beladi, Hamid, 1998. "Product Versus Process Patents: A Theoretical Approach," Journal of Policy Modeling, Elsevier, vol. 20(2), pages 193-199, April.
  5. Aidan Hollis, 2005. "How do Brands’ “Own Generics” Affect Pharmaceutical Prices?," Review of Industrial Organization, Springer, vol. 27(4), pages 329-350, December.
  6. Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-65, June.
  7. Ying Kong & James R. Seldon, 2004. "Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets," Review of Industrial Organization, Springer, vol. 25(1), pages 71-86, 08.
  8. Grossman, G.M. & Lai, E., 2001. "International Protection of intellectual Property," Papers 215, Princeton, Woodrow Wilson School - Public and International Affairs.
  9. Meir Statman, 1981. "The effect of patent expiration on the market position of drugs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 2(2), pages 61-66, 06.
  10. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-59, March.
  11. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
  12. Keith E. Maskus, 1990. "Normative Concerns in the International Protection of Intellectual Property Rights," NBER Chapters, in: New Issues in the Uruguay Round, pages 387-409 National Bureau of Economic Research, Inc.
  13. Aoki, Reiko & Prusa, Thomas J., 1993. "International standards for intellectual property protection and R & D incentives," Journal of International Economics, Elsevier, vol. 35(3-4), pages 251-273, November.
  14. Taylor, M Scott, 1994. "TRIPs, Trade, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 361-81, May.
  15. Morton I. Kamien & Israel Zang, 1999. "Virtual Patent Extension by Cannibalization," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 117-131, July.
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