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

Yunyun Wan
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Yunyun Wan: Hitotsubashi University

The Japanese Economic Review, 2018, vol. 69, issue 3, No 6, 340-346

Abstract: 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.

Keywords: L13; L20; I11 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1111/jere.12189

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