Retailing policies for generic medicines.

As there is general disagreement about the way generic medicines should be commercialized, two retailing policies are analyzed, taking into account their effects on the welfare of patients, government, pharmacies and physicians. In the first policy scenario, pharmacies are allowed to substitute generic medicines for branded ones, while in the second, substitution is forbidden. In both cases a pharmacies association is allowed to have a share in the production of generic medicines. The model predicts that under some conditions patients may prefer substitution by pharmacies but when doctors' decisions are binding, they are never "excessively bad". However, the policy choice belongs to the government, which prefers to allow for substitution more often than patients would like.