Manufacturing and Regulatory Barriers to Generic Drug Competition: A Structural Model Approach

43 Pages Posted: 24 Mar 2018 Last revised: 30 Apr 2020

See all articles by Yixin (Iris) Wang

Yixin (Iris) Wang

University of Illinois at Urbana-Champaign - Department of Business Administration

Jun Li

University of Michigan, Stephen M. Ross School of Business

Ravi Anupindi

University of Michigan, Stephen M. Ross School of Business

Date Written: March 21, 2018

Abstract

Understanding the drivers of market concentration in the generic pharmaceutical industry is essential to guaranteeing the availability of low-cost generics. In this paper, we develop a structural model to capture the multiple determinants governing manufacturers' entry decisions; in particular, we focus on how manufacturing complexity and the regulatory environment affect concentration in drug markets. We estimate the model using data collated from six disparate sources. We find that manufacturing complexity, as reflected in the number of active ingredients, for example, significantly reduces the likelihood of generics entry. Moreover, the delay in the review process for the generics applications significantly affects the number of firms entering a market. Our policy simulations suggest that a shortened review time significantly increases the average number of entrants per market and brings down the fraction of markets with no generics entry. However, a notable portion of markets would still lack generic competition.

Keywords: Government Regulation, Market Entry Decision, Structural Modeling

Suggested Citation

Wang, Yixin (Iris) and Li, Jun and Anupindi, Ravi, Manufacturing and Regulatory Barriers to Generic Drug Competition: A Structural Model Approach (March 21, 2018). Available at SSRN: https://ssrn.com/abstract=3145635 or http://dx.doi.org/10.2139/ssrn.3145635

Yixin (Iris) Wang (Contact Author)

University of Illinois at Urbana-Champaign - Department of Business Administration ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Jun Li

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Ravi Anupindi

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734.615.8621 (Phone)

HOME PAGE: http://michiganross.umich.edu/faculty-research/faculty/ravi-anupindi

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