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Generic substitution. Micro evidence from register data in Norway

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  • Dalen Gag Morten

    ()

  • Furu Kai

    ()

  • Locatelli Marilena

    ()

  • Strom Steinar

    ()
    (University of Turin)

Abstract

The importance of prices, doctor and patient characteristics, and market institutions for the likelihood of choosing generic drugs instead of the more expensive original brand-name version were examined. Using an extensive dataset extracted from The Norwegian Prescription Database (NorPD) containing all prescriptions dispensed to individuals in February 2004 and 2006 on 23 different drugs (chemical substances) in Norway, we find strong evidence for the importance of both doctor and patient characteristics for the choice robabilities. The price difference between brand and generic versions and insurance coverage both affect generic substitution. Moreover, controlling for the retail chain affiliation of the dispensing pharmacy, we find that pharmacies play an important role in promoting generic substitution. In markets with more recent entry of generic drugs, the brand-name loyalty proves to be much stronger, giving less explanatory powerto our demand model. Length: 25 pages

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Bibliographic Info

Paper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis. Working Papers with number 200901.

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Date of creation: Jan 2009
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Handle: RePEc:uto:dipeco:200901

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  1. Kurt R. Brekke & Astrid L. Grasdal & Tor Helge Holmås, 2007. "Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?," CESifo Working Paper Series 2059, CESifo Group Munich.
  2. Dalen, Dag Morten & Habeth, Tonje & Strøm, Steinar, 2009. "Price regulation and generic competition in the pharmaceutical market," HERO On line Working Paper Series 2006:1, Oslo University, Health Economics Research Programme.
  3. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
  4. Ernst R. Berndt, 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 45-66, Fall.
  5. Grabowski, Henry G & Vernon, John M, 1992. "Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 331-50, October.
  6. Richard G. Frank & David S. Salkever, 1997. "Generic Entry and the Pricing of Pharmaceuticals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 75-90, 03.
  7. 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.
  8. Judith K. Hellerstein, 1998. "The Importance of the Physician in the Generic Versus Trade-Name Prescription Decision," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 108-136, Spring.
  9. Regan, Tracy L., 2008. "Generic entry, price competition, and market segmentation in the prescription drug market," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 930-948, July.
  10. Richard G. Frank & David S. Salkever, 1995. "Generic Entry and the Pricing of Pharmaceuticals," NBER Working Papers 5306, National Bureau of Economic Research, Inc.
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Cited by:
  1. Brekke, Kurt R. & Dalen, Dag Morten & Holmås, Tor Helge, 2013. "Diffusion of Pharmaceuticals: Cross-Country Evidence of Anti-TNF drugs," Discussion Paper Series in Economics 7/2013, Department of Economics, Norwegian School of Economics.
  2. 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), number RS24, September.
  3. Brick, Aoife & Gorecki, Paul K. & Nolan, Anne, 2013. "Ireland: Pharmaceutical Prices, Prescribing Practices and Usage of Generics in a Comparative Context," Research Series, Economic and Social Research Institute (ESRI), number RS32, September.

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