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Generic substitution: micro evidence from register data in Norway

  • Dag Dalen

    ()

  • Kari Furu

    ()

  • Marilena Locatelli

    ()

  • Steinar Strøm

    ()

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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File URL: http://hdl.handle.net/10.1007/s10198-010-0226-6
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Article provided by Springer in its journal The European Journal of Health Economics.

Volume (Year): 12 (2011)
Issue (Month): 1 (February)
Pages: 49-59

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Handle: RePEc:spr:eujhec:v:12:y:2011:i:1:p:49-59
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  1. 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.
  2. 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.
  3. Brekke, Kurt R. & Grasdal, Astrid L. & Holmås, Tor Helge, 2006. "Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?," Working Papers in Economics 14/06, University of Bergen, Department of Economics.
  4. Richard G. Frank & David S. Salkever, 1995. "Generic Entry and the Pricing of Pharmaceuticals," NBER Working Papers 5306, National Bureau of Economic Research, Inc.
  5. 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.
  6. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2.
  7. Dag Dalen & Steinar Strøm & Tonje Haabeth, 2006. "Price regulation and generic competition in the pharmaceutical market," The European Journal of Health Economics, Springer, vol. 7(3), pages 204-211, September.
  8. 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.
  9. 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.
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