Some Observations in the U.S. Prescription Drug Market after Patent Expiration During the 80s

25 Pages Posted: 25 Oct 2009

See all articles by Andrew T. Ching

Andrew T. Ching

Johns Hopkins University - Carey Business School

Date Written: August 1, 2004

Abstract

This paper summarizes four stylized facts about the prescription drug markets after patent expiration during the 80s: (i) generic firms entered the market at different points of time after patent expiration and they seldom exited; (ii) the brand-name price remained much higher than generic prices, and many brand-name firms raised their prices after generic entry; (iii) the average price kept decreasing over time even when the number of generic firms became constant; and (iv) it took time for generics to build up significant market shares. I argue that in order to explain these facts, one needs to model generic firms facing some uncertainty about the entry time, consumer being heterogeneous in price sensitivity, and uncertain about the quality of generics, and that it takes time for consumers to learn the true quality of generics.

Keywords: Prescription Drugs, Brand-name Drugs, Generic Drugs, Patent Expiration, Consumer Learning, Consumer Heterogeneity

JEL Classification: D12, D43, L13, L15, L65, M31

Suggested Citation

Ching, Andrew T., Some Observations in the U.S. Prescription Drug Market after Patent Expiration During the 80s (August 1, 2004). Available at SSRN: https://ssrn.com/abstract=1492264 or http://dx.doi.org/10.2139/ssrn.1492264

Andrew T. Ching (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
136
Abstract Views
1,083
rank
235,469
PlumX Metrics