Newton’s First Law as Applied to Pharmacies: Why Entry Order Matters for Generics

The first generic entrant into Canadian pharmaceutical markets has a surprisingly durable impact on market share: consistent with past research, we show that first entrants have a boost of roughly 25% in their expected market share some six years after entry. There appears to be considerable inertia in pharmacies’ choice of which generic drug to stock. In this article, we empirically explore possible explanations for this puzzling phenomenon, including reputation, pharmacy “gratitude,” patient resistance to switching, and transactions costs.