By introducing n (1) firms with infinite cross-price elasticity (i.e. generic drugs), we explore the effects of competition on the optimal pricing strategies under a Reference Pricing Scheme (RPS). A two-stage model repeated infinite number of times is presented. When stage 1 is competitive, the...

Observers worry that generic patent challenges are on the rise and reduce the effective market life of drugs. A related concern is that challenges disproportionately target high-sales drugs, reducing market life for these “blockbusters.”