A Probability Approach to Pharmaceutical Demand and Price Setting: Does the Identity of the Third-Party Payer Matters for Prescribing Doctors?

Dag Morten Dalen, Marilena Locatelli, Enrico Sorisio and Steinar Strøm ()

No 3643, CESifo Working Paper Series from CESifo

Abstract: TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8 per cent of total pharmaceutical sale in Norway. Novelty of the paper is to examine, with the use of a unique natural policy experiment in Norway, to what extent the price responsiveness of prescription choices is affected when the identity of the third-party payer changes. The three dominating drugs in this market, Enbrel, Remicade, and Humira, are substitutes, but have had different and varying funding schemes - hospitals and the national insurance plan. A stochastic structural model for the three drugs, covering demand and price setting, is estimated in a joint maximum likelihood approach. We find that doctors are more responsive when the costs are covered by the hospitals compared to when costs are covered by national insurance.

Keywords: pharmaceuticals; discrete choice model; funding-schemes (search for similar items in EconPapers)
JEL-codes: C35 D43 I18 L11 (search for similar items in EconPapers)
Date: 2011
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Working Paper: A Probability Approach to Pharmaceutical Demand and Price Setting: Does the Identity of the Third-Party Payer Matters for Prescribing Doctors? (2011)
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