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Generic Substitution

Author

Listed:
  • Furu, Kari

    (Ragnar Frisch Centre for Economic Research)

  • Dalen, Dag Morten

    (Ragnar Frisch Centre for Economic Research)

  • Locatelli, Marilena

    (University of Turin)

  • Strøm, Steinar

    (University of Turin)

Abstract

We examine the importance of prices, doctor and patient characteristics, and market institutions for the likelihood of choosing generic drugs instead of the more expensive original brand-name version. Using an extensive dataset extracted from The Norwegian Prescription Database (NorPD) containing all prescriptions written in March 2004 and 2006 on 23 different drugs (chemical substances) in Norway, we find strong evidence for the importance of both doctor and patient characteristics for the choice probabilities. The price difference between brand and generic versions and insurance coverage both affect generic substitution. Moreover, controlling for the retail chain affiliation of the dispensing pharmacy, we find that pharmacies play an important role for patients’ willingness to substitute. In markets with more recent entry of generic drugs, the brand-name loyalty proves to be much stronger, giving less explanatory power to our demand model.

Suggested Citation

  • Furu, Kari & Dalen, Dag Morten & Locatelli, Marilena & Strøm, Steinar, 2008. "Generic Substitution," Memorandum 11/2008, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2008_011
    as

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    File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2008/Memo-11-2008.pdf
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    References listed on IDEAS

    as
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    6. Judith K. Hellerstein, 1998. "The Importance of the Physician in the Generic Versus Trade-Name Prescription Decision," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 108-136, Spring.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Generics; substitution; microdata; random utility model;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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