Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry

Silvia Appelt

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: Patent holders frequently attempt to mitigate the loss of monopoly power by authorizing generic entry prior to patent expiry (early entry). Competition in off-patent pharmaceutical markets may be adversely affected if early entry substantially impairs the attractiveness of subsequent market entry. I examine generic entry decisions made in the course of recent patent expiries to quantify the impact of early entry on incentives for generic entry. Using unique micro data and accounting for the endogeneity of early entry, I estimate recursive bivariate probit models of entry. Drug markets' pre-entry revenues largely determine both independent generic entry and early entry decisions. Early entry in turn has no significant impact on the likelihood of generic entry. Original drug producers appear to authorize generic entry prior to loss of exclusivity primarily fueled by rent-seeking rather than strategic entry-deterrence motives.

Keywords: Generic Entry; Early Entry; Anticompetitive Practices (search for similar items in EconPapers)
JEL-codes: C35 I11 L41 O34 (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-com, nep-ent, nep-ino, nep-ipr, nep-pr~ and nep-tid
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Citations: View citations in EconPapers (3)

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