Generic Substitution

Kari Furu, Dag Morten Dalen, Marilena Locatelli and Steinar Strøm ()
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Kari Furu: Ragnar Frisch Centre for Economic Research, Postal: Norway
Dag Morten Dalen: Ragnar Frisch Centre for Economic Research

No 11/2008, Memorandum from Oslo University, Department of Economics

Abstract: We examine the importance of prices, doctor and patient characteristics, and market institutions for the likelihood of choosing generic drugs instead of the more expensive original brand-name version. Using an extensive dataset extracted from The Norwegian Prescription Database (NorPD) containing all prescriptions written in March 2004 and 2006 on 23 different drugs (chemical substances) in Norway, we find strong evidence for the importance of both doctor and patient characteristics for the choice probabilities. The price difference between brand and generic versions and insurance coverage both affect generic substitution. Moreover, controlling for the retail chain affiliation of the dispensing pharmacy, we find that pharmacies play an important role for patients’ willingness to substitute. In markets with more recent entry of generic drugs, the brand-name loyalty proves to be much stronger, giving less explanatory power to our demand model.

Keywords: Generics; substitution; microdata; random utility model (search for similar items in EconPapers)
JEL-codes: C35 I18 L65 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2008-06-17
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