IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_3227.html
   My bibliography  Save this paper

Choosing among Competing Blockbusters: Does the Identity of the Third-Party Payer Matter for Prescribing Doctors?

Author

Listed:
  • Dag Morten Dalen
  • Enrico Sorisio
  • Steinar Strøm

Abstract

TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8 % of total pharmaceutical sale in Norway. With use of a unique natural policy experiment in Norway, this paper examines to what extent the identity of the third-party payer affects doctors’ choice between the three available drugs. We are able to investigate 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. We find that treatment choices are price responsive, and that the price response is considerably higher when the doctor’s affiliated hospital covers the cost instead of a traditional fee-for-service insurance plan. When the doctors’ hospitals are covering the cost of this treatment instead of insurance the total cost of treatment is significantly reduced.

Suggested Citation

  • Dag Morten Dalen & Enrico Sorisio & Steinar Strøm, 2010. "Choosing among Competing Blockbusters: Does the Identity of the Third-Party Payer Matter for Prescribing Doctors?," CESifo Working Paper Series 3227, CESifo.
    • Handle: RePEc:ces:ceswps:_3227
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3227.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ernst R. Berndt & Robert S. Pindyck & Pierre Azoulay, 2003. "Consumption Externalities and Diffusion in Pharmaceutical Markets: Antiulcer Drugs," Journal of Industrial Economics, Wiley Blackwell, vol. 51(2), pages 243-270, June.
    2. Sara Ellison Fisher & Iain Cockburn & Zvi Griliches & Jerry Hausman, 1997. "Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 426-446, Autumn.
    3. Small, Kenneth A., 1983. "The incidence of congestion tolls on urban highways," Journal of Urban Economics, Elsevier, vol. 13(1), pages 90-111, January.
    4. Gregory S. Crawford & Matthew Shum, 2005. "Uncertainty and Learning in Pharmaceutical Demand," Econometrica, Econometric Society, vol. 73(4), pages 1137-1173, July.
    5. Enrico Sorisio & Steinar STRØM, 2008. "Innovation and the Nordic Erythropoietin Market," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 116(1), pages 99-126.
    6. Paul Contoyannis & Jeremiah Hurley & Paul Grootendorst & Sung‐Hee Jeon & Robyn Tamblyn, 2005. "Estimating the price elasticity of expenditure for prescription drugs in the presence of non‐linear price schedules: an illustration from Quebec, Canada," Health Economics, John Wiley & Sons, Ltd., vol. 14(9), pages 909-923, September.
    7. Leibowitz, Arleen & Manning, Willard G. & Newhouse, Joseph P., 1985. "The demand for prescription drugs as a function of cost-sharing," Social Science & Medicine, Elsevier, vol. 21(10), pages 1063-1069, January.
    8. O'Brien, Bernie, 1989. "The effect of patient charges on the utilisation of prescription medicines," Journal of Health Economics, Elsevier, vol. 8(1), pages 109-132, March.
    9. Toshiaki Iizuka, 2007. "Experts' agency problems: evidence from the prescription drug market in Japan," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 844-862, September.
    10. 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.
    11. Lundin, Douglas, 2000. "Moral hazard in physician prescription behavior," Journal of Health Economics, Elsevier, vol. 19(5), pages 639-662, September.
    12. H C W L Williams, 1977. "On the Formation of Travel Demand Models and Economic Evaluation Measures of User Benefit," Environment and Planning A, , vol. 9(3), pages 285-344, March.
    13. Coscelli, Andrea & Shum, Matthew, 2004. "An empirical model of learning and patient spillovers in new drug entry," Journal of Econometrics, Elsevier, vol. 122(2), pages 213-246, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tianyan Hu & Sandra L. Decker & Shin-Yi Chou, 2014. "The Impact of Health Insurance Expansion on Physician Treatment Choice: Medicare Part D and Physician Prescribing," NBER Working Papers 20708, National Bureau of Economic Research, Inc.
    2. Lu, Fangwen, 2014. "Insurance coverage and agency problems in doctor prescriptions: Evidence from a field experiment in China," Journal of Development Economics, Elsevier, vol. 106(C), pages 156-167.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dalen Dag Morten & Locatelli Marilena & Sorisio Enrico & Strom Steinar, 2011. "A Probability Approach to Pharmaceutical Demand and Price Setting: Does the Identity of the Third-Party Payer Matters for Prescribing Doctors?," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201110, University of Turin.
    2. Toshiaki Iizuka, 2012. "Physician Agency and Adoption of Generic Pharmaceuticals," American Economic Review, American Economic Association, vol. 102(6), pages 2826-2858, October.
    3. Liu, Ya-Ming & Yang, Yea-Huei Kao & Hsieh, Chee-Ruey, 2012. "Regulation and competition in the Taiwanese pharmaceutical market under national health insurance," Journal of Health Economics, Elsevier, vol. 31(3), pages 471-483.
    4. Arcidiacono, Peter & Ellickson, Paul B. & Landry, Peter & Ridley, David B., 2013. "Pharmaceutical followers," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 538-553.
    5. Ching, Andrew T., 2010. "Consumer learning and heterogeneity: Dynamics of demand for prescription drugs after patent expiration," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 619-638, November.
    6. Andrew J. Epstein & Jonathan D. Ketcham, 2014. "Information technology and agency in physicians' prescribing decisions," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 422-448, June.
    7. Luiz Andrade & Catherine Sermet & Sylvain Pichetti, 2016. "Entry time effects and follow-on drug competition," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(1), pages 45-60, January.
    8. Dag Morten Dalen & Marilena Locatelli & Enrico Sorisio & Steinar Str?m, 2014. "Does the Identity of the Third-Party Payer Matter for Prescribing Doctors?," Applied Economics and Finance, Redfame publishing, vol. 1(1), pages 39-54, May.
    9. Brekke, Kurt Richard & Holmås, Tor Helge & Straume, Odd Rune, 2013. "Margins and market shares: Pharmacy incentives for generic substitution," European Economic Review, Elsevier, vol. 61(C), pages 116-131.
    10. Ivan Moreno-Torres, 2011. "Generic drugs in Spain: price competition vs. moral hazard," Working Papers XREAP2011-04, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2011.
    11. Makoto Kakinaka & Ryuta Kato, 2013. "Regulated medical fee schedule of the Japanese health care system," International Journal of Health Economics and Management, Springer, vol. 13(3), pages 301-317, December.
    12. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    13. Brekke, Kurt R. & Grasdal, Astrid L. & Holms, Tor Helge, 2009. "Regulation and pricing of pharmaceuticals: Reference pricing or price cap regulation?," European Economic Review, Elsevier, vol. 53(2), pages 170-185, February.
    14. Skipper, Niels & Vejlin, Rune, 2015. "Determinants of generic vs. brand drug choice: Evidence from population-wide Danish data," Social Science & Medicine, Elsevier, vol. 130(C), pages 204-215.
    15. Granlund, David, 2009. "Are private physicians more likely to veto generic substitution of prescribed pharmaceuticals?," Social Science & Medicine, Elsevier, vol. 69(11), pages 1643-1650, December.
    16. Izhak, Olena, 2019. "Extra costs of integrity: Pharmacy markups and generic substitution in Finland," DICE Discussion Papers 307, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    17. Daniel Burkhard & Christian P. R. Schmid & Kaspar Wüthrich, 2019. "Financial incentives and physician prescription behavior: Evidence from dispensing regulations," Health Economics, John Wiley & Sons, Ltd., vol. 28(9), pages 1114-1129, September.
    18. Crea, Giovanni & Galizzi, Matteo M. & Linnosmaa, Ismo & Miraldo, Marisa, 2019. "Physician altruism and moral hazard: (no) Evidence from Finnish national prescriptions data," Journal of Health Economics, Elsevier, vol. 65(C), pages 153-169.
    19. Sabrina Terrizzi & Chad Meyerhoefer, 2020. "Estimates Of The Price Elasticity Of Switching Between Branded And Generic Drugs," Contemporary Economic Policy, Western Economic Association International, vol. 38(1), pages 94-108, January.
    20. David B. Ridley, 2015. "Payments, Promotion, And The Purple Pill," Health Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 86-103, January.

    More about this item

    Keywords

    pharmaceuticals; discrete choice model; funding-schemes;
    All these keywords.

    JEL classification:

    • 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, Pricing, and Design - - - 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3227. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.