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Brand Loyalty and Generic Entry: Why Do Brand-Name Drug Companies Launch Their Own Generics?

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  • Yunyun Wan

    (Hitotsubashi University)

Abstract

Facing generic competition, brand-name drug companies sometimes launch their own generics called “authorised generics” (AGs) through a third-party entity. If that strategy works, an AG should be launched for every branded drug that comes off patent. This, however, contradicts the fact that only a small proportion of branded drugs have had AGs. To explain this puzzle, I develop a two-period model in which a brand-name drug company exploits its name brand before generic entry. The model predicts that the brand-name company launches an AG only when brand loyalty is sufficiently weak.

Suggested Citation

  • Yunyun Wan, 2018. "Brand Loyalty and Generic Entry: Why Do Brand-Name Drug Companies Launch Their Own Generics?," The Japanese Economic Review, Springer, vol. 69(3), pages 340-346, September.
    • Handle: RePEc:spr:jecrev:v:69:y:2018:i:3:d:10.1111_jere.12189
    DOI: 10.1111/jere.12189
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    L13; L20; I11;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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