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Pharmaceutical promotion and GP prescription behaviour

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  • Eric de Laat
  • Rudy Douven

    ()

  • Esther Mot

    ()

  • F. Windmeijer

Abstract

The aim of this paper is to empirically analyse the responses by general practitioners to promotional activities for pharmaceuticals by pharmaceutical companies. Promotion can be beneficial for society as a means of providing information, but it can also be harmful in the sense that it lowers price sensitivity of doctors and it merely is a means of establishing market share, even when cheaper, therapeutically equivalent drugs are available. A model is estimated that includes interactions of promotion expenditures and prices and that explicitly exploits the panel structure of the data, allowing for drug specific effects and dynamic adjustments, or habit persistence. The data used are aggregate monthly GP prescriptions per drug together with monthly outlays on drug promotion for the period 1994-1999 for 11 therapeutic markets, covering more than half of the total prescription drug market in the Netherlands. Identification of price effects is obtained by the introduction of the Pharmaceutical Prices Act, which established that Dutch drugs prices became a weighted average of the prices in surrounding countries after June 1996. We conclude that, on average, GP drug price sensitivity is small, but adversely affected by promotion.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 30.

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Date of creation: Apr 2004
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Handle: RePEc:cpb:discus:30

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  1. Stéphane Jacobzone, 2000. "Pharmaceutical Policies in OECD Countries: Reconciling Social and Industrial Goals," OECD Labour Market and Social Policy Occasional Papers, OECD Publishing 40, OECD Publishing.
  2. Matraves, Catherine, 1999. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 47(2), pages 169-94, June.
  3. Scherer, F.M., 2000. "The pharmaceutical industry," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 25, pages 1297-1336 Elsevier.
  4. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, Elsevier, vol. 22(2), pages 151-185, March.
  5. Rizzo, John A, 1999. "Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 42(1), pages 89-116, April.
  6. Coscelli, Andrea, 2000. "The Importance of Doctors' and Patients' Preferences in the Prescription Decision," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 48(3), pages 349-69, September.
  7. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, Elsevier, vol. 10(2), pages 107-142, July.
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Cited by:
  1. Neilson, William S., 2009. "Price sensitive prescribers," Economics Letters, Elsevier, Elsevier, vol. 104(1), pages 20-22, July.
  2. Machiel Dijk & Richard Nahuis & Daniel Waagmeester, 2006. "Does Public Service Broadcasting Serve The Public? The Future of Television in the Changing Media Landscape," De Economist, Springer, Springer, vol. 154(2), pages 251-276, June.
  3. Peter Leeflang & Jaap Wieringa, 2010. "Modeling the effects of pharmaceutical marketing," Marketing Letters, Springer, Springer, vol. 21(2), pages 121-133, June.
  4. Massimo Filippini & Fabian Heimsch & Giuliano Masiero, 2013. "Antibiotic consumption and the role of dispensing physicians," CEPRA working paper, USI Università della Svizzera italiana 1302, USI Università della Svizzera italiana.
  5. Gorecki, Paul K. & Nolan, Anne & Brick, Aoife & Lyons, Seán, 2012. "Pharmaceuticals Delivery in Ireland. Getting a Bigger Bang for the Buck," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number RS24.

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