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The European Journal of Health Economics

, Volume 14, Issue 4, pp 667–675 | Cite as

Competition in prescription drug markets: the roles of trademarks, advertising, and generic names

  • Roger Feldman
  • Félix Lobo
Original Paper

Abstract

We take on two subjects of controversy among economists—advertising and trademarks—in the context of the market for generic drugs. We outline a model in which trademarks for drug names reduce search costs but increase product differentiation. In this particular framework, trademarks may not benefit consumers. In contrast, the generic names of drugs or “International Nonproprietary Names” (INN) have unquestionable benefits in both economic theory and empirical studies. We offer a second model where advertising of a brand-name drug creates recognition for the generic name. The monopoly patent-holder advertises less than in the absence of a competitive spillover.

Keywords

Prescription drug markets Trademarks Advertising Generic names 

JEL Classification

I18 I11 H41 

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  1. 1.University of MinnesotaMinneapolisUSA
  2. 2.Universidad Carlos IIIMadridSpain

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