Title: The generic competition paradox in a universal healthcare's prescription drug market

Authors: Kenichi Ohkita; Kazumitsu Minamikawa

Addresses: Graduate School of Management, Kagawa University, 2-1 Saiwai-cho, Takamatsu, Kagawa, 760-8523, Japan ' Department of Business Administration, Nanzan University, Yamazatocho, Showa-ku, Nagoya, 466-8673, Japan

Abstract: This paper provides a game theoretic model on the likelihood of the generic competition paradox in a universal healthcare's prescription drug market. Using a two-stage model in which patients are prescribed either the brand-name drug, a generic alternative, or no drug, it is found that under certain conditions the price of the brand-name drug increases after the entry of generic alternatives. The generic competition paradox is found to require full market coverage and to be more likely to occur with a larger difference in the perceived quality of the brand-name drug and its generic alternatives, higher marginal costs of production, or lower insurance coverage.

Keywords: prescriptions; brand-name drugs; generic drugs; generic competition paradox; GCP; universal healthcare; prescription drug market; prescription drugs; game theory; drug prices; perceived quality; production costs; marginal costs; insurance cover.

DOI: 10.1504/IJBG.2015.069704

International Journal of Business and Globalisation, 2015 Vol.14 No.4, pp.438 - 445

Available online: 17 May 2015 *

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