[Pharm-policy] New argument in favor of Bolar-Roche provision

[James Love]

forward from Jerome Dumoulin.  Jamie

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From=20Jerome.Dumoulin@upmf-grenoble.fr Fri Jan 21 05:05:58 2000
Date: Fri, 21 Jan 2000 10:57:36 +0100
From: J=E9r=F4me Dumoulin <Jerome.Dumoulin@upmf-grenoble.fr>
To: love@cptech.org
Subject: New argument in favor of Bolar-Roche provision

Jamie,

I have just read a new article in Health Economics (Jorge Mestre
Ferrandiz, The Impact of Generic Goods in the Pharmaceutical Industry,
Health Economics 8: 599-612 1999) which fuels a argument in favor of
Bolar-Roche provision, This is a new argument I think.

The author studied firm strategies about launching branded generics. It
is the same on the generics market as on many markets, the first mover
has an advantage to take market shares, so the innovative firm has a
great advantage to produce the generic itself. Without Bolar Roche
provision, the pionner firm can easily be the first mover on the generic
market (because they can prepare marketing generic drugs several years
before potential competitors) and can take a great advantage on
potential competitors. So in many case, the only generic will be a
branded generic marketed by the brand drug pionner firm. This firm will
lock in the market with its two products : the branded product and the
generic product. The result will be no actual competition.

"The firm uses the generic as a means to increase the price of its
branded good in order to obtain higher profits. Furthermore, this firm
can charge a higher price for the generic good compared with the price
that would otherwise be set by a third firm not producing producing the
generic alternative." (snip)  "The policy implications of these results
are that, since the promotion of generic drugs is coming from different
sides of the economy, from a social point of view, their entry should be
encouraged through firms not producing their own branded good, but
rather through firms who specialise in the productyion of generics.
Hence, entry barriers to these firms should be made as low as possible."
Bolar Roche provision is not only a mean to bring generics on the market
as soon as possible, as it is usually argued, but it is a mean to make
generic competition sustainable, preventing patent owner to monopolise
the generic drugs market.  We can suppose pharma companies are so
strongly opposed to Bolar-Roche provision because they know this
mecanism.

   Yours Jerome

J=E9r=F4me Dumoulin
Institut de Recherche Economique sur la Production et le D=E9veloppement
Universit=E9 Pierre Mend=E8s-France
BP 47
F 38040 Grenoble Cedex 9
tel : 33-(0)4 76 82 54 50
fax : 33-(0)4 76 82 59 89
jerome.dumoulin@upmf-grenoble.fr=20