PSEUDO-GENERICS

Definition

Psuedo-generics arise when brand-name manufacturers launch a branded drug under a generic name for a cheaper price before patent termination. When the brand-name's patent protection expires, generic manufacturers are allowed to enter the market, launching cheaper alternatives to the brand-name product. Brand-name drugs are only able to compete with generic alternatives due to name recognition and preconceived notions that generics are qualitatively different from brand-name products. After a patent of a brand-name product expires, market shares of brand-name manufacturers drop by 50%. This has led brand-name manufacturers to develop "branded generics," or "pseudo-generics."

Because brand-name manufacturers are owners of the patent rights, they can sell their generic version before generic competitors enter the market. And while in the short term, pseudo-generics allow for slighter cheaper versions of brand-name drugs to enter the market before patent termination which is good for consumers, pseudo-generics reduce the number of generic companies entering the market. This is because generic manufacturers are deterred from entering when the brand-name manufacturer already has generic market shares. The decreased number of generics (reduced competition), in turn, harms consumers.