Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry

Originators seek to mitigate the loss of monopoly power by authorizing generic entry prior to patent expiry. Off-patent competition may be adversely affected if authorized generic entry substantially lowers the attractiveness of subsequent generic entry. This study assesses the impact of authorized generic entry on independent generic entry in recent cases of patent expiry in Germany. The results of a recursive bivariate probit regression, accounting for the endogeneity of authorized generic entry, show that authorized generic entry has no significant effect on the likelihood of generic entry. Business scope expansion and rent-seeking motives drive authorized generic entry decisions.