Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act

IN 1984, Congress enacted a new law that greatly affected the economics the pharmaceutical industry in the United States. It has been characterized the most important legislation affecting competition in the pharmaceutical since the 1962 Kefauver-Harris Amendments to the and Drug Act. This 1984 law, known as the Drug Price Competition Patent Term Restoration Act (hereinafter the 1984 Act), facilitated entry of generic drug products after patent expiration while it also part of the patent life lost during the premarket regulatory process new introductions. 1 entry by generics was relatively limited prior to 1984 because costly Food and Drug Administration (FDA) requirements that had to met by the imitative products. That is, generic drugs often would have duplicate many of the pioneer's tests to gain market approval after expiration. As a result of the 1984 law, generic products need only bioequivalence to the pioneer's brand, and generic entry has significantly. This has provided a body of very interesting data analyze the pattern of entry and the pricing strategies followed by the and incumbents. this article, we make use of data covering the sales and prices of pioneer and generic products for eighteen drug products, generally the time period 1984-88.