Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets: Comment

Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets: Comment Review of Industrial Organization (2006) 28:183–187 © Springer 2006 DOI 10.1007/s11151-006-0002-z Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets: Comment VASCO RODRIGUES Faculdade de Economia e Gestao ˜ , Universidade Catolica ´ Portuguesa, Rua Diogo Botelho, 1327, 4169–005 Porto, Portugal, E-mail: vrodrigues@porto.ucp.pt Kong and Seldon (2004) address an interesting issue concerning the economics of the pharmaceutical industry: the production of “pseudo- generics”. Producers of brand-name products sometimes also sell generic versions of their own products, or at least license their production. Selling at considerable discounts, these ‘pseudo-generics’ cannibalize the market of brand-name products. The authors try to provide a rationale for this behavior. They argue that pseudo-generics may serve as an entry-deterrence device, avoiding the entry of new ‘true-generic’ producers. Kong and Seldon (2004) claim, in their three main propositions, that first a pseudogeneric can be used to profitably deter entry, second it is always more profitable to deter entry using a pseudo-generic than a brand-name product, and lastly entry deterrence using a pseudo-generic is welfare enhancing if the model parameters lie within a specific range. In this comment, I discuss the interpretation of their first proposition, and refute their second and third propositions. The authors start their http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets: Comment

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2006 by Springer
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-006-0002-z
Publisher site
See Article on Publisher Site

Abstract

Review of Industrial Organization (2006) 28:183–187 © Springer 2006 DOI 10.1007/s11151-006-0002-z Pseudo-Generic Products and Barriers to Entry in Pharmaceutical Markets: Comment VASCO RODRIGUES Faculdade de Economia e Gestao ˜ , Universidade Catolica ´ Portuguesa, Rua Diogo Botelho, 1327, 4169–005 Porto, Portugal, E-mail: vrodrigues@porto.ucp.pt Kong and Seldon (2004) address an interesting issue concerning the economics of the pharmaceutical industry: the production of “pseudo- generics”. Producers of brand-name products sometimes also sell generic versions of their own products, or at least license their production. Selling at considerable discounts, these ‘pseudo-generics’ cannibalize the market of brand-name products. The authors try to provide a rationale for this behavior. They argue that pseudo-generics may serve as an entry-deterrence device, avoiding the entry of new ‘true-generic’ producers. Kong and Seldon (2004) claim, in their three main propositions, that first a pseudogeneric can be used to profitably deter entry, second it is always more profitable to deter entry using a pseudo-generic than a brand-name product, and lastly entry deterrence using a pseudo-generic is welfare enhancing if the model parameters lie within a specific range. In this comment, I discuss the interpretation of their first proposition, and refute their second and third propositions. The authors start their

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jan 12, 2006

References

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