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Generic and Branded Pharmaceutical Pricing: Competition Under Switching Costs

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  • Aljoscha Janssen

Abstract

This article examines pricing in pharmaceutical markets where branded products face competition from generics. After providing evidence for brand premia and switching costs using prescription-level and matched socioeconomic data for the entire Swedish population, I estimate a dynamic oligopoly model and evaluate counterfactual policies that reduce the impact of frictions on pricing. Lengthening the procurement period reduces the impact of switching costs on prices. The policy increases prices on average, but more so for individuals with infrequent consumption, high education and income. In a counterfactual where brand choice decisions are moved from patients to medical experts, prices fall substantially.

Suggested Citation

  • Aljoscha Janssen, 2023. "Generic and Branded Pharmaceutical Pricing: Competition Under Switching Costs," The Economic Journal, Royal Economic Society, vol. 133(653), pages 1937-1967.
    • Handle: RePEc:oup:econjl:v:133:y:2023:i:653:p:1937-1967.
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    File URL: http://hdl.handle.net/10.1093/ej/uead021
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    Cited by:

    1. Janssen, Aljoscha & Granlund, David, 2023. "The importance of the first generic substitution: Evidence from Sweden," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 1-25.

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