A Probability Approach to Pharmaceutical Demand and Price Setting: Does the Identity of the Third-Party Payer Matters for Prescribing Doctors?
AbstractTNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8 per cent of total pharmaceutical sale in Norway. Novelty of the paper is to examine, with the use of a unique natural policy experiment in Norway, to what extent the price responsiveness of prescription choices is affected when the identity of the third-party payer changes. The three dominating drugs in this market, Enbrel, Remicade, and Humira, are substitutes, but have had different and varying funding schemes -hospitals and the national insurance plan. A stochastic structural model for the three drugs, covering demand and price setting, is estimated in a joint maximum likelihood approach. We find that doctors are more responsive when the costs are covered by the hospitals compared to when costs are covered by national insurance.
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Bibliographic InfoPaper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis. Working Papers with number 201110.
Length: 31 pages
Date of creation: Nov 2011
Date of revision:
Other versions of this item:
- Dag Morten Dalen & Marilena Locatelli & Enrico Sorisio & Steinar Strøm, 2011. "A Probability Approach to Pharmaceutical Demand and Price Setting: Does the Identity of the Third-Party Payer Mattersfor Prescribing Doctors?," CESifo Working Paper Series 3643, CESifo Group Munich.
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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