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The intensity of competition after patent expiry in pharmaceuticals. A cross-country analysis

Abstract

This paper shows that the relationships between the dynamics of drug priees, patent expiry, and competition by multisource drugs vary significantly across countries. A clear distinction seems to emerge. On the one side, systems that rely on market based competition (particularly the US) promote a clear distinction between firms that act as innovators and firms that act as imitators after patent expiry. Original products enjoy premium prices under patent protection, and face fierce price competition after patent expiry. On the contrary, systems that rely on administered prices (particularly France and Italy) nurture strategies of pre-emptive brand proliferation and horizontal differentiation by imitative brand name products, well before patent expiry. Our work confirms that that systems that rely on administered prices have tended to stifle price competition, to protect less efficient companies, and to encourage strategies of incremental innovation and imitation

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