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: email@example.com 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
Review of Industrial Organization – Springer Journals
Published: Jan 12, 2006
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