The Impact of Generic Drug Entry on Market Shares and Prices of Brand-Name Drugs– Evidence from Chinese Pharmaceutical Market


      This article empirically analyzes for the pharmaceutical market in China. We aimed to analyse how market shares and prices for brand name drugs are affected by generic competition.


      The analysis was based on micro data for 27 different original drugs, which experienced initial generic entry during 2006 to 2016. Quarterly utilization and expenditure data were derived from China Medicine Economic Information (CMEI), a large database of drug procurement records covering 699 tertiary hospitals (accounting for 40% of all tertiary hospitals) cross 28 provinces in mainland China. We compared the change of market share and price of brand-name drugs after the generic entry. General Linear Regression was performed to analyze the impact factors of market share of brand-name drugs.


      15 of 27 brand-name drugs maintained over 70% market share (6 brand-name drugs occupying more than 90% market share) after eight quarters following the first generic entry. 25 brand-name companies lowered prices with an average price decrease of 0.03% eight quarters after the first generic competitor appeared while in 2 cases prices rose by an average of 0.01%. GLM showed that the number of generic manufactures and time interval of the first generic entry exhibited a negative relation with the share of the off-patent branded medicine (P<0.01; P<0.01). Regression also showed that the number of generic manufactures and time interval of the first generic entry were not significantly associated with the brand-name prices (P=0.61; P=0.42).


      Our results showed that there was relatively low market penetration of generic medicines in China. There was no statistically significant change in brand-name prices when generic competition started. The lack of generic competition may lead to increased costs in the Chinese pharmaceutical market. It is needed to further research for more effective policy mix that will encourage generic entry and penetration.