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

Yixin (Iris) Wang, Jun Li, Ravi Anupindi

Research output: Working paper

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 generic drug markets. We estimate the model using data collated from six disparate sources. We find that manufacturing complexity, as reflected in the drug administration route, for example, significantly reduces the likelihood of generics entry. Moreover, the speed at which generic drug applications are processed by the FDA significantly affects the number of firms entering a market. Our policy simulations suggest that to encourage competition in the generic drug markets, the FDA needs to maintain a moderate review speed; being either too fast or too slow can be problematic and associated with more concentrated markets.
Original languageEnglish (US)
Number of pages41
DOIs
StatePublished - Mar 24 2018

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Generic drugs
Manufacturing
Structural model
Food and Drug Administration
Pharmaceutical industry
Generic entry
Costs
Market concentration
Drugs
Policy simulation
Regulatory environment

Keywords

  • Government Regulation
  • Market Entry Decision
  • Structural Modeling

Cite this

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