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Do Pharmaceutical Sales Respond to Scientific Evidence?

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  • Pierre Azoulay
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    Abstract

    I investigate how different sources of information influence the diffusion of pharmaceutical innovations. In prescription-drug markets, both advertising and scientific information stemming from clinical trials can affect physicians' prescription choices. Using novel indices of clinical-research output, I find that both marketing and scientific evidence directly influence the diffusion process in the antiulcer-drug market, with marketing having a more pronounced influence. I also find evidence that clinical outputs are important drivers of firms' marketing efforts, affecting sales indirectly. Taken together, the direct and indirect effects of science on demand imply strong private incentives for clinical research. I conclude that product-market competition in the pharmaceutical industry is shaped by both advertising rivalries and scientific rivalries. Moreover, drug advertising may perform an important informative function. Copyright (c) 2002 Massachusetts Institute of Technology.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

    Volume (Year): 11 (2002)
    Issue (Month): 4 (December)
    Pages: 551-594

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    Handle: RePEc:bla:jemstr:v:11:y:2002:i:4:p:551-594

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    Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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    Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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    Cited by:
    1. Matthias Dahm & Paula González & Nicolás Porteiro, 2008. "Trials, Tricks and Transparency: How Disclosure Rules Affect Clinical Knowledge," Working Papers 08.02, Universidad Pablo de Olavide, Department of Economics.
    2. Pedroso, Marcelo Caldeira & Nakano, Davi, 2009. "Knowledge and information flows in supply chains: A study on pharmaceutical companies," International Journal of Production Economics, Elsevier, vol. 122(1), pages 376-384, November.
    3. Andrew Ching & Masakazu Ishihara, 2010. "The effects of detailing on prescribing decisions under quality uncertainty," Quantitative Marketing and Economics, Springer, vol. 8(2), pages 123-165, June.
    4. Pradeep Chintagunta & Renna Jiang & Ginger Jin, 2009. "Information, learning, and drug diffusion: The case of Cox-2 inhibitors," Quantitative Marketing and Economics, Springer, vol. 7(4), pages 399-443, December.
    5. Grönqvist, Erik & Lundin, Douglas, 2006. "Incentives for Clinical Trials," Working Paper Series in Economics and Finance 636, Stockholm School of Economics.
    6. Brekke, Kurt R. & Kuhn, Michael, 2003. "Direct-to-Consumer Advertising in Pharmaceutical Markets," Working Papers in Economics 05/03, University of Bergen, Department of Economics.
    7. Venkataraman, S. & Stremersch, S., 2007. "The Debate on Influencing Doctors’ Decisions: Are Drug Characteristics the Missing Link?," Research Paper ERS-2007-056-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    8. Ching, Andrew & Ishihara, Masakazu, 2007. "The Effects of Detailing on Prescribing Decisions under Two-Sided Learning," MPRA Paper 4935, University Library of Munich, Germany.
    9. Jie Chen & John Rizzo, 2012. "Pricing dynamics and product quality: the case of antidepressant drugs," Empirical Economics, Springer, vol. 42(1), pages 279-300, February.
    10. Price, Joseph & Simon, Kosali, 2009. "Patient education and the impact of new medical research," Journal of Health Economics, Elsevier, vol. 28(6), pages 1166-1174, December.
    11. John Cawley & John A. Rizzo, 2005. "The Competitive Effects of Drug Withdrawals," NBER Working Papers 11223, National Bureau of Economic Research, Inc.
    12. Coscelli, Andrea & Shum, Matthew, 2004. "An empirical model of learning and patient spillovers in new drug entry," Journal of Econometrics, Elsevier, vol. 122(2), pages 213-246, October.

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