Margins and Market Shares: Pharmacy Incentives for Generic Substitution

Kurt Brekke (), Tor Helge Holmås () and Odd Rune Straume
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Tor Helge Holmås: Stein Rokkan Centre for Social Studies, Postal: Nygårdsgaten 5, , N-5015 Bergen, , Norway

No 18/2010, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: We study the impact of product margins on pharmacies’ incentive to promote generics instead of brand-names. First, we construct a theoretical model where pharmacies can persuade patients with a brand-name prescription to purchase a generic version instead. We show that pharmacies’substitution incentives are determined by relative margins and relative patient copayments. Second, we exploit a unique product level panel data set, which contains information on sales and prices at both producer and retail level. In the empirical analysis, we find a strong relationship between the margins of brand-names and generics and their market shares. In terms of policy implications, our results suggest that pharmacy incentives are crucial for promoting generic sales.

Keywords: Pharmaceuticals; Pharmacies; Generic Substitution. (search for similar items in EconPapers)
JEL-codes: I11 I18 L13 L65 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2010-07-07
New Economics Papers: this item is included in nep-com and nep-mkt
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Margins and market shares: Pharmacy incentives for generic substitution (2013)
Working Paper: Margins and Market Shares: Pharmacy Incentives for Generic Substitution (2012)
Working Paper: Margins and Market Shares:Pharmacy Incentives for Generic Substitution (2010)
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