Market Effects of Generic Entry: The Role of Physicians and of Non-Bioequivalent Competitors

Patent expiration represents a turning point for the brand losing patent protection as bioequivalent generic versions of the drug quickly enter the market at reduced prices. In this paper, we study how physician characteristics and their prescribing decisions impact the competition among molecules of a therapeutic class, once generic versions of one of these molecules enter the market. Specifically, we study the evolution of the Selective Serotonine Reuptake Inhibitors (SSRIs) after the introduction of generic versions of fluoxetine (brand name Prozac) in the United Kingdom (UK). Our results suggest that, to fully understand the market evolution after generic entry, public health officials need to consider the marketing activities of pharmaceutical companies and determine how (1) individual physicians prescribe all competing drugs, and (2) respond to drug prices and marketing actions. For example, we find that a group of physicians sensitive to detailing switch from fluoxetine to non-bioequivalent branded alternatives after patent expiration, as Prozac significantly reduces its marketing support. Consequently, the market share of fluoxetine decreases despite being available at significant price discount under generic form, and despite the increase of prescriptions by price-sensitive physicians. Hence, governments interested in assessing generics diffusion should consider the prescribing across all competitors, whether or not bioequivalent, and determine the size of physician segments sensitive to pharmaceutical marketing activity and prices.