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Pharmaceutical promotion and GP prescription behaviour

Author

Listed:
  • Eric de Laat

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Rudy Douven

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • Esther Mot

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • F. Windmeijer

Abstract

The aim of this paper is to empirically analyse the responses by general practitioners to promotional activities for pharmaceuticals by pharmaceutical companies. Promotion can be beneficial for society as a means of providing information, but it can also be harmful in the sense that it lowers price sensitivity of doctors and it merely is a means of establishing market share, even when cheaper, therapeutically equivalent drugs are available. A model is estimated that includes interactions of promotion expenditures and prices and that explicitly exploits the panel structure of the data, allowing for drug specific effects and dynamic adjustments, or habit persistence. The data used are aggregate monthly GP prescriptions per drug together with monthly outlays on drug promotion for the period 1994-1999 for 11 therapeutic markets, covering more than half of the total prescription drug market in the Netherlands. Identification of price effects is obtained by the introduction of the Pharmaceutical Prices Act, which established that Dutch drugs prices became a weighted average of the prices in surrounding countries after June 1996. We conclude that, on average, GP drug price sensitivity is small, but adversely affected by promotion.

Suggested Citation

  • Eric de Laat & Rudy Douven & Esther Mot & F. Windmeijer, 2004. "Pharmaceutical promotion and GP prescription behaviour," CPB Discussion Paper 30, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:30
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    References listed on IDEAS

    as
    1. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 10(2), pages 107-142, July.
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    3. Scherer, F.M., 2000. "The pharmaceutical industry," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 25, pages 1297-1336 Elsevier.
    4. Stéphane Jacobzone, 2000. "Pharmaceutical Policies in OECD Countries: Reconciling Social and Industrial Goals," OECD Labour Market and Social Policy Occasional Papers 40, OECD Publishing.
    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 349-369, September.
    6. Rizzo, John A, 1999. "Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 89-116, April.
    7. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
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    Citations

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    Cited by:

    1. Machiel Dijk & Richard Nahuis & Daniel Waagmeester, 2006. "Does Public Service Broadcasting Serve The Public? The Future of Television in the Changing Media Landscape," De Economist, Springer, vol. 154(2), pages 251-276, June.
    2. Filippini, M. & Heimsch, F. & Masiero, G., 2014. "Antibiotic consumption and the role of dispensing physicians," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 242-251.
    3. Pieter Dylst & Arnold Vulto & Brian Godman & Steven Simoens, 2013. "Generic Medicines: Solutions for a Sustainable Drug Market?," Applied Health Economics and Health Policy, Springer, vol. 11(5), pages 437-443, October.
    4. Hui Zhang & Gregory Zaric, 2015. "Using price–volume agreements to manage pharmaceutical leakage and off-label promotion," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(7), pages 747-761, September.
    5. Peter Leeflang & Jaap Wieringa, 2010. "Modeling the effects of pharmaceutical marketing," Marketing Letters, Springer, vol. 21(2), pages 121-133, June.
    6. Neilson, William S., 2009. "Price sensitive prescribers," Economics Letters, Elsevier, vol. 104(1), pages 20-22, July.
    7. 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.
    8. repec:spr:aphecp:v:15:y:2017:i:3:d:10.1007_s40258-016-0300-z is not listed on IDEAS
    9. Terris-Prestholt, Fern & Windmeijer, Frank, 2016. "How to sell a condom? The impact of demand creation tools on male and female condom sales in resource limited settings," Journal of Health Economics, Elsevier, vol. 48(C), pages 107-120.

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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