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Pharmaceutical generics, vertical product differentiation and public policy

  • Antonio Cabrales

This paper studies oligopolistic competition in off-patent pharmaceutical markets using a vertical product differentiation model. This model can explain the observation that countries with stronger regulations have smaller generic market shares. It can also explain the differences in observed regulatory regimes. Stronger regulation may be due to a higher proportion of production that is done by foreign firms. Finally, a closely related model can account for the observed increase in prices by patent owners after entry of generic producers.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Working Papers, Research Center on Health and Economics with number 662.

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Date of creation: Jan 2003
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Handle: RePEc:upf:upfses:662
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
  2. Zweifel, Peter & Crivelli, Luca, 1996. "Price Regulation of Drugs: Lessons from Germany," Journal of Regulatory Economics, Springer, vol. 10(3), pages 257-73, November.
  3. 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.
  4. Antonio Cabrales & Walter Garcia Fontes & Massimo Motta, 1997. "Risk dominance selects the leader. An experimental analysis," Economics Working Papers 222, Department of Economics and Business, Universitat Pompeu Fabra.
  5. W. Duncan Reekie, 1997. "Cartels, Spontaneous Price Discrimination and International Pharmacy Retailing," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(3), pages 279-285.
  6. Cabrales, Antonio & Motta, Massimo, 2001. "Country asymmetries, endogenous product choice and the timing of trade liberalization," European Economic Review, Elsevier, vol. 45(1), pages 87-107, January.
  7. Gambardella, Alfonso & Orsenigo, Luigi & Pammolli, Fabio, 2000. "Global Competitiveness in Pharmaceuticals: A European Perspective," MPRA Paper 15965, University Library of Munich, Germany.
  8. Jorge Mestre Ferrándiz, 1999. "The impact of generic goods in the pharmaceutical industry," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 599-612.
  9. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "Price competition, quality and income disparities," CORE Discussion Papers RP -370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Stéphane Jacobzone, 2000. "Pharmaceutical Policies in OECD Countries: Reconciling Social and Industrial Goals," OECD Labour Market and Social Policy Occasional Papers 40, OECD Publishing.
  11. Danzon, Patricia M & Chao, Li-Wei, 2000. "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 311-57, October.
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