Can Branded Drugs Benefit from Generic Entry? Switching to Non-Bioequivalent Molecules and the Role of Physician Response to Detailing and Prices

Abstract

Patent expiration represents a turning point for the brand losing patent protection as bioequivalent generic versions of the drug quickly enter the market at reduced prices. In this paper, we study how physician characteristics and their prescribing decisions impact the competition among molecules of a therapeutic class, once generic versions of one of these molecules enter the market. Our results suggest that to understand the diffusion of generics in the category marketers should (1) determine the size of physician segments sensitive to marketing activity and prices, and (2) assess the marketing activity of all pharmaceutical firms, whether bioequivalent or not. We further discuss the managerial implications of our results.

Keywords: Generic entry, Pharmaceuticals, Heterogeneity, Competition

JEL Classification: D40, D21, C23, C25, C11, C13, I11, I18, L10, M30