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Drug Innovations and Welfare Measures Computed from Market Demand: The Case of Anti-cholesterol Drugs

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  • Abe Dunn
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Abstract

The pharmaceutical industry is characterized as having substantial investment in R&D and a large number of new product introductions, which poses special problems for price measurement caused by the quality of drug products changing over time. This paper applies recent demand estimation techniques to individual-level data to construct a constant-quality price index for anti-cholesterol drugs. Although the average price for anti-cholesterol drugs does not change over the sample period, I find that the constant-quality price index drops by 27 percent, a pace more in line with our expectations in such a dynamic segment of the industry. (JEL C43, L11, L65, O31)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 4 (2012)
Issue (Month): 3 (July)
Pages: 167-89

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Handle: RePEc:aea:aejapp:v:4:y:2012:i:3:p:167-89

Note: DOI: 10.1257/app.4.3.167
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Cited by:
  1. Kaiser, Ulrich & Mendez, Susan J. & Rønde, Thomas & Ullrich, Hannes, 2014. "Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark," Journal of Health Economics, Elsevier, Elsevier, vol. 36(C), pages 174-187.
  2. Duso, Tomaso & Herr, Annika & Suppliet, Moritz, 2014. "The welfare impact of parallel imports: A structural approach applied to the German market for oral anti-diabetics," DICE Discussion Papers 137, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  3. Abe Dunn & Adam Hale Shapiro, 2011. "Physician Market Power and Medical-Care Expenditures," BEA Working Papers, Bureau of Economic Analysis 0078, Bureau of Economic Analysis.
  4. Abe Dunn & Eli Liebman & Adam Hale Shapiro, 2012. "Implications of Utilization Shifts on Medical-Care Price Measurement," BEA Working Papers, Bureau of Economic Analysis 0087, Bureau of Economic Analysis.
  5. Carlos Giovanni González Espitia & Natalia Serna Borrero, 2014. "A discrete choice model approximation to the consumer’s choice among television displays," Alcamentos, Universidad de Alcalá, Departamento de Economía. 1402, Universidad de Alcalá, Departamento de Economía..

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