How to design a competing system: Creating a looping-out knowledge cycle model of the US pharmaceutical industry

Governments across the globe establish systems to maintain diversity in specific industries and avoid the formation of oligopolistic market structures. The U.S. government has made special provisions for the country's pharmaceutical industry; namely, the Orange Book, Abbreviated New Drug Application (ANDA), and the Bolar Act. These three provisions combine into a special competing system that offers “Product-Patent Linkage” (PPL), accelerating generic products, and research and development free space to establish a level playing field between generic and brand drug companies. We construct a looping-out knowledge cycle model to examine the relationship between knowledge resources, competing system and oligopoly, and find that the “Knowledge conversion” point determines if knowledge can loop away from private proprietary and avoid oligopolistic tendencies. We believe that competing system should be designed to enable the formation of the knowledge conversion point, which prompts knowledge flow from private proprietary into the public domain. On the other hand, the importance of accelerating imitation and free space for research and development is also important for designing a competing system.