A supply chain generalized network oligopoly model for pharmaceuticals under brand differentiation and perishability

In this paper, we construct a generalized network oligopoly model with arc multipliers for supply chains of pharmaceutical products using variational inequality theory. The model captures the Cournot competition among the manufacturers who seek to determine their profit-maximizing product flows, which can be perishable, with the consumers differentiating among the products of the firms, whether branded or generic, and the firms taking into consideration the discarding costs. The numerical examples demonstrate that a brand pharmaceutical product may lose its dominant market share as a consequence of patent rights expiration and because of generic competition.

Highlight► We develop a new model of supply chain network competition for pharmaceuticals. ► The game theoretic model captures product perishability and brand differentiation. ► We utilize generalized networks and variational inequality theory. ► A case study on cholesterol-lowering drugs is presented. ► The impacts of patent rights expiration and generic drug competition are quantified.