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 for generics approval 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 drug approval review time significantly increases the average number of entrants per market and reduces the fraction of markets with no generics entry; however, a notable portion of markets would still lack any generic competition.
Original language | English (US) |
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Pages (from-to) | 1449-1467 |
Number of pages | 19 |
Journal | Management Science |
Volume | 69 |
Issue number | 3 |
DOIs | |
State | Published - Mar 2023 |
Externally published | Yes |
Keywords
- government: regulations
- market entry decision
- structural modeling
ASJC Scopus subject areas
- Strategy and Management
- Management Science and Operations Research