Consumer Information and Pharmaceutical Prices: Theory and Evidence

David Granlund () and Niklas Rudholm ()
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David Granlund: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Niklas Rudholm: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 709, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: In this paper, the impact of increased consumer information on brand name and generic pharmaceutical prices is analyzed both theoretically and empirically. The theoretical results show that an increase in information is likely to reduce the price of brand name pharmaceuticals, while the results regarding generics are less clear. In the empirical part of the paper, the introduction of the substitution reform in the Swedish pharmaceuticals market in October 2002 is used as a natural experiment regarding the effects of increased consumer information on pharmaceutical prices. The results clearly show that the reform has lowered the price of both brand name- and generic pharmaceuticals.

Keywords: Pharmaceutical industry; generic competition; generic drugs; brand name drugs (search for similar items in EconPapers)
JEL-codes: D80 D83 I11 L65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-hea and nep-mkt
Date: Written 2007-04-23
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