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Uncertainty in the Generic Versus Brand Name Prescription Decision

Author

Listed:
  • Hellström, Jörgen

    (Department of Economics, Umeå University)

  • Rudholm, Niklas

    (Department of Economics, Umeå University)

Abstract

This paper analyzes the impact of uncertainty concerning product quality of generic drugs on the substitution behavior of prescribing physicians. It is shown that uncertainty about the generic drug quality gives the physician a value of waiting for more information before switching to the generic version. In addition, it is shown that reducing the approval requirements for generic drugs, thereby increasing uncertainty about quality, may discourage physicians from prescribing such drugs. A small empirical study supports the theoretical findings and indicate that uncertainty about the quality of generic drugs do affect physician prescription behavior.

Suggested Citation

  • Hellström, Jörgen & Rudholm, Niklas, 2003. "Uncertainty in the Generic Versus Brand Name Prescription Decision," Umeå Economic Studies 602, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0602
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    References listed on IDEAS

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    More about this item

    Keywords

    Pharmaceutical industry; uncertainty; real options;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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