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The Impact of Physician Preferences and Patient Habits on the Diffusion of New Drugs


  • Johannesson, Magnus

    () (Dept. of Economics, Stockholm School of Economics)

  • Lundin, Douglas

    (Dept. of Economics, Stockholm School of Economics)


We study the choice of drug for the treatment of high blood pressure (hypertension) in Sweden between 1988-1994. During this time period calcium antagonists and ACE-inhibitors increased their market shares at the expense of the older drugs diuretics and beta-blockers. We use a prescription micro dataset where both patients and physicians can be followed over time---an important feature since it allows us to study the impact of physician preferences and patient habits on the choice of drug. The choice of drug is unaffected by relative prices, indicating a moral hazard problem on the Swedish drug market characterized by a high degree of third-party financing. Physician preferences, measured as physician prescription history, are important for the choice of drug among new patients. Among existing patients the effect of physician preferences is mitigated by patient habit formation which slows down the diffusion of new drugs. Without habit effects the market share of calcium antagonists and ACE-inhibitors would have been more than 50% higher during our observation period (30% instead of the observed 19%).

Suggested Citation

  • Johannesson, Magnus & Lundin, Douglas, 2001. "The Impact of Physician Preferences and Patient Habits on the Diffusion of New Drugs," SSE/EFI Working Paper Series in Economics and Finance 460, Stockholm School of Economics, revised 12 Aug 2002.
  • Handle: RePEc:hhs:hastef:0460

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    Cited by:

    1. TODO Yasuyuki, 2009. "Quantitative Evaluation of Determinants of Export and FDI: Firm-level evidence from Japan," Discussion papers 09019, Research Institute of Economy, Trade and Industry (RIETI).
    2. Elisabetta Cherchi & Francesco Manca, 2011. "Accounting for inertia in modal choices: some new evidence using a RP/SP dataset," Transportation, Springer, vol. 38(4), pages 679-695, July.

    More about this item


    pharmaceuticals; physician behavior; habit formation; mixed logit estimator;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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