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The Norwegian market for pharmaceuticals and the non-mandatory substitution reform of 2001: the case of enalapril

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  • Razzolini, Tiziano

    (The Ragnar Frisch Centre for Economic Research)

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    Abstract

    A new demand model which accounts for the effect of the age of drugs on pharmaceutical demand is provided. Within this framework the problem of persistence in consumption of original branded drugs and a particular case of intra-molecular substitution are analyzed. I find that interacting price with time in a logit demand structure provides intuitive patterns of substitution between branded and generic drugs and yields, with an assumption of Bertrand-Nashequilibrium on the supply side, intuitive dynamics of the mark-ups for generic manufacturers over time. The effect of a non-mandatory substitution reform introduced in Norway in March 2001 is analyzed in terms of increased sensitivity to price and is found to be negligible. The presence of competition between generic producers is also verified.

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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2004/Memo-12-2004.pdf
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    Bibliographic Info

    Paper provided by Oslo University, Department of Economics in its series Memorandum with number 12/2004.

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    Length: 39 pages
    Date of creation: 26 Oct 2004
    Date of revision:
    Handle: RePEc:hhs:osloec:2004_012

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    Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
    Phone: 22 85 51 27
    Fax: 22 85 50 35
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    Web page: http://www.oekonomi.uio.no/indexe.html
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    Related research

    Keywords: Generic substitution; off-patent; branded drugs;

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    1. Paul Ellickson & Scott Stern & Manuel Trajtenberg, 2001. "Patient Welfare and Patient Compliance -- An Empirical Framework for Measuring the Benefits from Pharmaceutical Innovation," NBER Chapters, in: Medical Care Output and Productivity, pages 539-564 National Bureau of Economic Research, Inc.
    2. Coscelli, Andrea, 2000. "The Importance of Doctors' and Patients' Preferences in the Prescription Decision," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 349-69, September.
    3. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
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