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Offering Pharmaceutical Samples: The Role of Physician Learning and Patient Payment Ability

Author

Listed:
  • Ram Bala

    (Leavey School of Business, Santa Clara University, Santa Clara, California 95053)

  • Pradeep Bhardwaj

    (College of Business Administration, University of Central Florida, Orlando, Florida 32816)

  • Yuxin Chen

    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208)

Abstract

Physicians may learn about prescription drug effectiveness directly from the firm via detailing or from patient experience. Patient-mediated learning is aided by the use of free drug samples. The effective use of samples is hampered by a lack of understanding of its exact return on investment implications. We seek to fill this gap by incorporating the physician's sample allocation behavior in the firm's decision making. We uncover the following implications for firms as well as policy makers. First, we find that the optimal sampling level for a drug category is a nonmonotonic function of patient payment ability and the price of the drug. Second, an increase in the cost of samples can lead to an increase in sampling and a decrease in detailing when the physician's propensity to provide sample subsidies is high. Third, when future market growth is expected to be high (early stage product life cycle and/or chronic drugs) and sampling efficiency is low, the use of sampling is profitable for the firm but leads to lower market coverage than when sampling is disallowed.

Suggested Citation

  • Ram Bala & Pradeep Bhardwaj & Yuxin Chen, 2013. "Offering Pharmaceutical Samples: The Role of Physician Learning and Patient Payment Ability," Marketing Science, INFORMS, vol. 32(3), pages 522-527, May.
  • Handle: RePEc:inm:ormksc:v:32:y:2013:i:3:p:522-527
    DOI: 10.1287/mksc.1120.0743
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    References listed on IDEAS

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    1. Kissan Joseph & Murali Mantrala, 2009. "A model of the role of free drug samples in physicians’ prescription decisions," Marketing Letters, Springer, vol. 20(1), pages 15-29, March.
    2. Gregory S. Crawford & Matthew Shum, 2005. "Uncertainty and Learning in Pharmaceutical Demand," Econometrica, Econometric Society, vol. 73(4), pages 1137-1173, July.
    3. Cutrona, S.L. & Woolhandler, S. & Lasser, K.E. & Bor, D.H. & McCormick, D. & Himmelstein, D.U., 2008. "Characteristics of recipients of free prescription drug samples: A nationally representative analysis," American Journal of Public Health, American Public Health Association, vol. 98(2), pages 284-289.
    4. Natalie Mizik & Robert Jacobson, 2004. "Are Physicians ÜEasy MarksÝ? Quantifying the Effects of Detailing and Sampling on New Prescriptions," Management Science, INFORMS, vol. 50(12), pages 1704-1715, December.
    5. 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.
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    Cited by:

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