This study attempts to investigate the generalcharacteristics of antibiotic drug industry,with emphasis onmarket structure as well as the pricing policy and to estimatethe amount of money saved if generic drugs are encouraged tosubstitute the branded drugs. This study requires primary data to supplement theunderstanding about the market structure,therefore,the fieldsurvey was carried out and the data were collected so as toanalyze the market structure and to estimate the amount of moneysaved derived from elasticity of substitution. It is found that antibiotic drugs market is not purelycompetitive in the sense of static microeconomics theory. Theprice competition in antibiotic drugs is intensive. The overallsuccess of generic drugs is quite limited Most of the brandeddrug manufacturers are the market leaders. Moreover,even thepatent life of the leading brands were expired,the brandedproducts retain a large market share. In the case of pricingpolicy,the study found the existance of price discriminationamoung the generic drugs and branded drugs. The antibiotic drugindustry may not practice price competition,but rather engage inother non-pricing competition mechanism. This study has tried toestimate the elasticity of substitution of branded drugs bygeneric drugs, considering the tight oligopoly market anddominant market, in 3 criteria as follows: a) no substitution between different sub-therapeutic classof drugs. b) perfect substitution between different sub-therapeuticclass of drugs. c) substitution among group of drugs classified accordingto patent life. This study has found that the elasticity ofsubstitution of branded drugs by generic drugs is quite low.There is a prevalence of generic drugs, for which patents haveexpired. This study has shown the greater competition and lowerlevels of concentration. Some values of the elasticity of substitution of brandeddrugs by generic drugs, especially among the dominant market andthe new antibiotic drugs, are extremely high in the absolutevalue which has shown the distortion in this industry. As aresult,the estimated amount of money saved derived from thesubstitution of branded drugs by generic drugs is quite low. Theconsumers loss from the antibiotic drugs in tight oligopolymarket and the old antibiotic drugs. On the contrary,theconsumers gain for those which belonged to the dominant marketand the new antibiotic drugs.