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Substitution Policy and Generic Competition

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  • Birg, Laura

Abstract

I model the market for an active ingredient (with a brand-name drug and n differentiated generic versions) to study the effect of a substitution rule on prices and the extensive and intensive margin of generic competition. Both substitution rules with physician and patient veto decrease the brand-name price and shift market shares from the brand-name drug to the generics. A substitution rule with physician (patient) veto increases (decreases) generic prices and increases (decreases) the number of generic firms.

Suggested Citation

  • Birg, Laura, 2019. "Substitution Policy and Generic Competition," University of Göttingen Working Papers in Economics 241, University of Goettingen, Department of Economics, revised 2019.
    • Handle: RePEc:zbw:cegedp:241
    as

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    File URL: https://www.econstor.eu/bitstream/10419/194354/1/cege-dp241-revised.pdf
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    References listed on IDEAS

    as
    1. Madden Paul & Pezzino Mario, 2011. "Oligopoly on a Salop Circle with Centre," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-30, January.
    2. Regan, Tracy L., 2008. "Generic entry, price competition, and market segmentation in the prescription drug market," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 930-948, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    substitution rule; generic competition;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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