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Structural Models of the Prescription Drug Market

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  • Ching, Andrew T.
  • Hermosilla, Manuel
  • Liu, Qiang

Abstract

We survey the literature on structural models for the prescription drug market, which has attracted significant attention from researchers in marketing and economics, and related fields. The literature has evolved from adopting standard structural models developed for other markets to models that are specifically designed to capture the institutional details of the prescription drug market. Along the way, these empirical frameworks have not only greatly improved in terms of explaining stylized facts, but also in terms of producing better counterfactual predictions. Topics covered by this survey include the application of learning models to explain slow diffusion, post-patent expiry competition, prepatent expiry competition, R&D and new drug introduction, managerial and public policy analysis, and the economics of the Medicare Part-D program. We conclude by discussing future research directions.

Suggested Citation

  • Ching, Andrew T. & Hermosilla, Manuel & Liu, Qiang, 2019. "Structural Models of the Prescription Drug Market," Foundations and Trends(R) in Marketing, now publishers, vol. 13(1), pages 1-1–76, December.
    • Handle: RePEc:now:fntmkt:1700000050
    DOI: 10.1561/1700000050
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    References listed on IDEAS

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    1. Stoneman, P, 1981. "Intra-Firm Diffusion, Bayesian Learning and Profitability," Economic Journal, Royal Economic Society, vol. 91(362), pages 375-388, June.
    2. Minjae Song & Sean Nicholson & Claudio Lucarelli, 2017. "Mergers with interfirm bundling: a case of pharmaceutical cocktails," RAND Journal of Economics, RAND Corporation, vol. 48(3), pages 810-834, August.
    3. Stefan Stremersch & Vardit Landsman & Sriram Venkataraman, 2013. "The Relationship Between DTCA, Drug Requests, and Prescriptions: Uncovering Variation in Specialty and Space," Marketing Science, INFORMS, vol. 32(1), pages 89-110, June.
    4. Bradley T. Shapiro, 2018. "Positive Spillovers and Free Riding in Advertising of Prescription Pharmaceuticals: The Case of Antidepressants," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 381-437.
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    Cited by:

    1. Shervin Shahrokhi Tehrani & Andrew T. Ching, 2024. "A Heuristic Approach to Explore: The Value of Perfect Information," Management Science, INFORMS, vol. 70(5), pages 3200-3224, May.
    2. Dubois, Pierre & Lasio, Laura, 2014. "Identifying Industry Margins with Unobserved Price Constraints: Structural Estimation on Pharmaceuticals," TSE Working Papers 14-471, Toulouse School of Economics (TSE), revised Mar 2018.
    3. McKibbin, Rebecca, 2023. "The effect of RCTs on drug demand: Evidence from off-label cancer drugs," Journal of Health Economics, Elsevier, vol. 90(C).
    4. Callejas, Jerónimo & Mohapatra, Debi Prasad, 2021. "Welfare effects of public procurement of medicines: Evidence from Ecuador," International Journal of Industrial Organization, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Marketing Research;

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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