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The Supreme Court’s decision in Federal Trade Commission v. Actavis, Inc. is a challenge to conventional antitrust analysis. Conventional civil antitrust cases are decided by a preponderance of the evidence. This means that conduct challenged under the rule of reason is only condemned if the conduct resulted in more competitive harm in the actual world than a world without the alleged violation. Under conventional analysis, the intent of the parties also plays only a supporting role in determining whether the conduct was anticompetitive. A holder of a valid patent has a right to exclude others practicing the patented technology. And, the patent holder is not assumed to have market power because it expended resources in maintaining exclusionary rights. Actavis creates doubts about these propositions in circumstances beyond the “reverse” payment settlement of a patent suit that may have delayed an alleged infringer market entry. This chapter explores whether applying Actavis logic to antitrust litigation can result in condemnation of practices where there is little chance of an anticompetitive effect, where the patent holder likely has a valid and infringed patent, where there is little reason to believe that the patent holder has market power, and where only one party, or no parties, to an agreement have an anticompetitive intent. This chapter also investigates whether Actavis creates new problems with standing analysis, damages calculations, and the balancing of efficiencies against anticompetitive effects. Nevertheless, the lower courts have begun to extend the logic of Actavis. This is apparent in the condemnation of no-Authorized-generic settlements.

Brand-name pharmaceutical companies have engaged in a variety of business conduct that has increased price. One of these activities involves “product hopping,” or brand switches from one version of a drug to another. The antitrust analysis of product hopping implicates antitrust law, patent law, the Hatch–Waxman Act, and state drug product selection laws, as well as uniquely complicated markets characterized by buyers different from decision makers. As a result, courts have offered inconsistent approaches to product hopping.

In this chapter, we offer a framework that courts and government enforcers can employ to analyze product hopping. The framework is the first to incorporate the characteristics of the pharmaceutical industry. It defines a “product hop” to include instances in which the manufacturer (1) reformulates the product to make the generic nonsubstitutable and (2) encourages doctors to write prescriptions for the reformulated rather than the original product.

When the conduct meets both requirements, our framework offers two stages of analysis. First, we propose two safe harbors to ensure that the vast majority of reformulations will not face antitrust review. Second, the framework examines whether the hop passes the “no-economic-sense” test, determining if the behavior would make economic sense if the hop did not have the effect of impairing generic competition. Showing just how far the courts have veered from justified economic analysis, the test would recommend a different analysis than that used in each of the five product-hopping cases that have been litigated to date, and a different outcome in two of them.

This research studies the effect of deregulation of price cap in pharmaceutical market. Price regulation (either through price cap or reference price) is common practice in the pharmaceutical market but recently there are increasing voices calling for deregulation claiming that deregulation could help in lowering drug price and increase revenue of pharmaceutical firms. Upon those callings, Chinese government removed the price cap regulation in June 2015. The author uses this natural policy experiment to study this effect.

In this study, the author applied the interrupted time series analysis (ITSA) on the revenue data of nine categories of both generic and branded drugs in China from March 2011 to August 2016 (the time frame includes both before and after of the initialization of the deregulation) and analyzed the effect of deregulation.

The results showed that, whether the revenue of drugs will increase or decrease after the deregulation of price cap depends on the level of competition and the change of patterns of the branded and generic drugs are different. When HHI (Herfindahl–Hirschman index) is sufficiently low (competition is high), revenue does not change as a result of deregulation, when HHI is moderately low (moderate competition), revenue from generic drugs will decrease significantly and revenue from branded drugs will increase significantly, and when HHI is high (low competition), revenue from generic drugs will increase significantly and revenue from branded drugs will decrease significantly.

This is a unique study with a unique data set. Most previous studies focus on regulation of drug price and analyze how this may affect drug revenue; however, this is a natural policy experiment of de-regulation. Moreover, previously most studies focus on reference pricing regulation and this is price-cap, a different mechanism that is rarely studied. The originality/value is high of this article.

The Federal Trade Commission (FTC) has initiated policies and legal challenges that have shaped the evolution of competition in healthcare. This chapter discusses not only discusses the current matters in healthcare competition, but it also gives a history of past issues faced by the FTC and the approaches used to resolve them. These FTC actions range from challenges to hospital mergers to preventing “reverse payments” from patent holders to generic entrants in pharmaceuticals. Ultimately the healthcare industry faces many unique regulatory and competitive aspects that, while challenging, do not require special rules.

The purpose of this paper is to take a close look at competition among the generic entrants during the first three years after patent expiration and examine whether there is a first mover advantage. Pharmaceutical markets experience the entry of numerous generic firms upon expiration of the brand firm’s patent.

A random effect nested logit model of competition that allows for competition between the brand drug and generics, and among multiple generic drugs is specified. The model accommodates the effects of prices, detailing, sampling, journal advertising, time-in-market and molecule-specific characteristics. The model is estimated on cross-section time-series data for 49 molecules in which the brand drug lost patent exclusivity between 1992 and 2000.

Strong evidence that the early generic entrant enjoys a substantial market share and profit advantage over the second and the third entrants, after controlling for differences in marketing activities was found. In addition, evidence suggesting that the advantage is due to the response of the retail pharmacy channel and due to differential effectiveness of advertising and pricing between earlier versus later entrants was found.

This paper is the first to empirically model first mover advantage among undifferentiated products. The findings are useful for regulators in pharmaceutical and healthcare industries. They can also shed light on other industries where there is little or no quality differentiation, such as commodity trading, open-source software distribution and online banking.

The purpose of this paper is to examine the effects of generic medicine competition on the market share growth and pricing of originator brand medicine in the South African private pharmaceutical market.

Regression analysis is applied to market share data of originator brand drugs that have been exposed to competition from generic substitutes, based on an agency model of the prescribing physician, the pharmacist or the medical scheme.

The results indicate that the price of an originator brand medicine relative to the weighted average price of its generics has a significant negative impact on the change of its market share. Investigations into the prices of the originator brands, in relation to the number of generic equivalents in the market, indicate that the number of generics available in a specific market has a significant positive impact on the relative price of originators, thereby making originators relatively more expensive compared to their generic competitors. At the same time, the results show that the absolute price of the originator brand medicines declines as the number of generic equivalents in the market increases.

The results indicate that, for all modules pooled together, the relative price of the originator product to that of the generic equivalent, is responsible for a significant reduction in the relative change in the market share of the originator medicine. When analysed on the level of anatomical class, or the individual molecule, results are not consistent. For affordable healthcare, the results support the reduction in barriers to entry for generic medicine. Furthermore, the results support education and incentives for doctors, pharmacists and end‐users to develop generic alternatives as trusted brands in their own right.

This study quantitatively assesses the effect that generic medicine competition exerts on the market share of originator medicines in South Africa.

Purpose – To analyse the development of pharmaceutical policy in the Dutch market for outpatient prescription drugs since the early 1990s.

Methodology – A literature review and document analysis is performed to examine the effects of pharmaceutical policy on the performance of the Dutch market for outpatient prescription drugs since the early 1990s.

Findings – Government efforts to control prices of pharmaceuticals were effective in constraining prices of in-patent drugs, but had an opposite effect on the prices of generic drugs. The gradual transition towards managed competition – that particularly gained momentum after the introduction of the new universal health insurance scheme in 2006 – appears to be more effective in constraining prices of generic drugs than earlier government efforts to control these prices.

Originality – Comparative analysis of the impact of price regulation and managed competition on generic drug prices in the Netherlands.

Implications – Implications of the changing role of health insurers are discussed for the future market for prescription drugs and role of pharmacies in the Netherlands.

This paper aims to examine whether authorized generics (AGs) have influenced prices and market shares in markets for molecules facing generic competition in South Africa. AGs (clones), which are identical to the originator brands, offer a solution for originator companies to protect their markets from independent generic (IG) competition. IG competitors have claimed that AGs have a negative impact on pricing and competition.

In a retrospective analysis, pricing and quantity data for 24 months post generic entry were extracted for oral solid dosage form products which experienced generic entry into their markets between 2005 and 2011, divided into “Authorized generic affected” and “no authorized generic” markets. A series of indices was calculated, as well as market shares of competing originator and generic products, and the number of generic competitors determined. Indices and market share data for clone affected and unaffected groups were tested at 6, 12, 18 and 24 months using unmatched t-tests, at a 95 per cent significance level.

None of the evaluated pricing indices showed a consistently significant difference existing between AG-affected and no-AG samples. The only variable for which the two samples consistently differed was market shares, with originator brands experiencing significantly more market share erosion in AG-affected markets. Pricing levels of generics and originator products as well as growth of numbers of generic competitors were similar in both AG-affected and no-AG groups.

A study of this nature on the impacts of AGs in the South African generics has not been previously published and reflects the situation particular to the country.

This paper aims to study the post-patent ethical drug market and simulate the impact of Patient Protection and Affordable Care Act (ACA) on individuals, health-care providers and pharmaceutical firms. US policymakers have been looking at various ways to curb rising health-care costs in USA, including ways to promote the use of generic drugs in lieu of brand drugs. In this broader context, the implementation of ACA in December 2013 will introduce major changes in the pharmaceutical market.

To fully understand the impact of such policy changes, we develop a structural model to study consumers’ buying behavior and firm competition in the post-patent ethical drug markets. We use the estimated model parameters to conduct four policy simulations to illustrate the effect of Obamacare on increasing the relative size of price-insensitive segment, reducing price sensitivity in the price-sensitive segment, providing brand price discount to Medicare patients previously in the “donut hole” and the effect of change in people’s attitude toward generics.

Our model estimation reveals two classes of consumers with different price sensitivities. This heterogeneity explains the increase in the brand price after generic entry. We identify consumers’ switching costs between generic and brand drugs, as well as among different generics. From the policy simulation, we find that except the closure of Medicare donut hole, all other policy changes lead to increased usage of the focal molecule, and the efforts to increase insurance coverage and reduce the out of pocket payment for prescription drugs lead to increase in firm profit.

This paper is the first to illustrate the potential policy effect of Obamacare through a structural model on post-patent ethical drug market.

This paper aims to investigate why brand-name drugs are priced higher than their generic equivalents in the US market. The authors hypothesize that some consumers have a preference for brand names, which outweighs the cost savings realized by switching to generics. Consumers may prefer a brand drug because the brand may have a higher perceived quality due to advertising and other promotional activities. Additionally, individuals are habitual in their consumption of prescription drugs, which leads to continued use of the brand in the face of generic competition.

The authors develop a structural demand model and proceed to estimate it using wholesale price and demand data from the years 2000 through 2004.

The results of our analysis reveal that customers have a strong preference for brand drugs. In addition, consumers exhibit high switching costs for prescription drugs.

Considering the price and quantity of prescriptions filled each day, determining why brand drugs do not lower their prices to compete with their generic equivalents is an important question. Unfortunately, the existing literature only acknowledges this counter-intuitive business practice, but does not mathematically explain it. The authors address this knowledge gap in literature and provide important insight for all players in this industry including consumers, pharmaceutical manufacturers and health insurance companies.