The Impact of Physician Preferences and Patient Habits on the Diffusion of New Drugs

Magnus Johannesson and Douglas Lundin
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Douglas Lundin: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

No 460, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: We study the choice of drug for the treatment of high blood pressure (hypertension) in Sweden between 1988-1994. During this time period calcium antagonists and ACE-inhibitors increased their market shares at the expense of the older drugs diuretics and beta-blockers. We use a prescription micro dataset where both patients and physicians can be followed over time---an important feature since it allows us to study the impact of physician preferences and patient habits on the choice of drug.

The choice of drug is unaffected by relative prices, indicating a moral hazard problem on the Swedish drug market characterized by a high degree of third-party financing. Physician preferences, measured as physician prescription history, are important for the choice of drug among new patients. Among existing patients the effect of physician preferences is mitigated by patient habit formation which slows down the diffusion of new drugs. Without habit effects the market share of calcium antagonists and ACE-inhibitors would have been more than 50% higher during our observation period (30% instead of the observed 19%).

Keywords: pharmaceuticals; physician behavior; habit formation; mixed logit estimator (search for similar items in EconPapers)
JEL-codes: C25 I11 L10 O33 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001-09-12, Revised 2002-08-12
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (2)

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