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Uncertainty in the Generic Versus Brand Name Prescription Decision

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Author Info

  • Hellström, Jörgen

    ()
    (Department of Economics, Umeå University)

  • Rudholm, Niklas

    ()
    (Department of Economics, Umeå University)

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    Abstract

    This paper analyzes the impact of uncertainty concerning product quality of generic drugs on the substitution behavior of prescribing physicians. It is shown that uncertainty about the generic drug quality gives the physician a value of waiting for more information before switching to the generic version. In addition, it is shown that reducing the approval requirements for generic drugs, thereby increasing uncertainty about quality, may discourage physicians from prescribing such drugs. A small empirical study supports the theoretical findings and indicate that uncertainty about the quality of generic drugs do affect physician prescription behavior.

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    File URL: http://www.econ.umu.se/DownloadAsset.action?contentId=72829&languageId=3&assetKey=ues602
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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 602.

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    Length: 21 pages
    Date of creation: 20 Jan 2003
    Date of revision:
    Handle: RePEc:hhs:umnees:0602

    Contact details of provider:
    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
    Email:
    Web page: http://www.econ.umu.se/
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    Related research

    Keywords: Pharmaceutical industry; uncertainty; real options;

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    1. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    2. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
    3. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management.
    4. Fiona Scott Morton, 1997. "The Objectives of the FDA's Office of Generic Drugs," NBER Working Papers 6143, National Bureau of Economic Research, Inc.
    5. Hartley, K & Lavers, R J & Maynard, A K, 1986. "Regulation and Development Times in the U.K. Pharmaceutical Industry," Scottish Journal of Political Economy, Scottish Economic Society, vol. 33(4), pages 355-69, November.
    6. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
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