When a drug first stops being protected by a patent, in order for another company to begin making a generic version, they have to pay some up-front costs (of course).
If the government requirements for starting a generic for it are particularly stringent, it seems like these up-front costs might be particularly high?
I feel like there may be a strategy stealing argument that might apply here?
If it would be profitable for another company to pay the upfront costs to produce a new generic, then it seems like the company that is already producing the drug could undercut them, by producing the same drug as they are already making. (perhaps under a different brand name as they were already doing?)
This seems like it would discourage other companies from trying, as there might be a significant chance they don’t recoup their up-front cost?
If the company with the patent releases a new improved version of the drug, which is under a new patent, it seems like they could potentially phase the old one out of production, getting people on to the new one? If they didn’t need to lower the price of the old one due to no generic being produced, then even if the improvements are marginal, it might not be hard to get people to switch to the improved-and-still-under-patent version (just by telling people it is an improvement and that old version might not be available soon).
If they then stop producing the old version, then a company that makes generics could then make a generic without worrying about being undercut by the original company, but if people are switched to the improved version, will they notice that there is a generic of the version they used to take, and, if so, will they trust it? Maybe? I don’t know. Maybe they would. (Oh, especially if the out-of-pocket price is the same, due to insurance, they might be less inclined to try switching to it..)
If it is unclear whether people would switch to it, then the company considering making the generic has a significant wager to make. Would they make it?
Maybe they would. Maybe the chain of events I described falls apart at some point. I don’t think it is obvious that it does, but it seems reasonably likely that this chain I described doesn’t work and isn’t a real phenomenon. But I don’t think it obviously doesn’t work.
If the government requirements for starting a generic for it are particularly stringent, it seems like these up-front costs might be particularly high?
I feel like there may be a strategy stealing argument that might apply here?
If it would be profitable for another company to pay the upfront costs to produce a new generic, then it seems like the company that is already producing the drug could undercut them, by producing the same drug as they are already making. (perhaps under a different brand name as they were already doing?)
This seems like it would discourage other companies from trying, as there might be a significant chance they don’t recoup their up-front cost?
If the company with the patent releases a new improved version of the drug, which is under a new patent, it seems like they could potentially phase the old one out of production, getting people on to the new one? If they didn’t need to lower the price of the old one due to no generic being produced, then even if the improvements are marginal, it might not be hard to get people to switch to the improved-and-still-under-patent version (just by telling people it is an improvement and that old version might not be available soon).
If they then stop producing the old version, then a company that makes generics could then make a generic without worrying about being undercut by the original company, but if people are switched to the improved version, will they notice that there is a generic of the version they used to take, and, if so, will they trust it? Maybe? I don’t know. Maybe they would. (Oh, especially if the out-of-pocket price is the same, due to insurance, they might be less inclined to try switching to it..)
If it is unclear whether people would switch to it, then the company considering making the generic has a significant wager to make. Would they make it?
Maybe they would. Maybe the chain of events I described falls apart at some point. I don’t think it is obvious that it does, but it seems reasonably likely that this chain I described doesn’t work and isn’t a real phenomenon. But I don’t think it obviously doesn’t work.