Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets

Abstract

This paper examines incentives for brand-name pharmaceutical producers to market pseudo-generic versions of their own branded products upon the expiry of patent protection.Using a two-stage game model, we determine that under plausible demand and cost conditions, brand-name incumbents can find it profitable to produce pseudo-generics as a means of blocking rivals' entry even when independent firms producing true generics face low entry costs.The model shows that social welfare can be higher when firms use pseudo-generics instead of capacity for entry deterrence as long as substitutability between brand-name and generic products is sufficiently high.

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Kong, Y., Seldon, J.R. Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets. Review of Industrial Organization 25, 71–86 (2004). https://doi.org/10.1023/B:REIO.0000040524.32034.04

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  • barriers
  • deterrence
  • pharmaceuticals
  • pseudo-generics