EconPapers    
Economics at your fingertips  
 

Generics and New Goods in Pharmaceutical Price Indexes

Zvi Griliches and Iain Cockburn ()

No 4272, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the issue of new goods and price indexes for the important and tractable case of generic and branded drugs. By treating generics as entirely distinct goods and "linking them in" to indexes with fixed weights, the standard price indexes fail to reflect the substantial welfare gains to those consumers who, like the FDA, regard generic and branded versions of a drug as being perfect substitutes. We discuss the treatment of heterogenous consumers in constructing aggregate price indexes, and then, using detailed data on wholesale prices of two anti-infective drugs, present calculations of various alternatives to the official indexes. These reflect both heterogeneity of tastes for brandedness, and also the empirically important phenomenon of diffusion of generic drugs into the market following patent expiration. We find very significant differences: for one of the drugs studied, the standard price index rose by 14% over the sample period, while our preferred alternative index fell by 48%.

JEL-codes: D12 L65 (search for similar items in EconPapers)
Date: 1993-02
Note: PR
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Published as American Economic Review, vol. 84 no. 5, 1994 pp 1213-1232.

Downloads: (external link)
http://www.nber.org/papers/w4272.pdf (application/pdf)

Related works:
Journal Article: Generics and New Goods in Pharmaceutical Price Indexes (1994) Downloads
Working Paper: Generics and New Goods in Pharmaceutical Price Indexes (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4272

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4272

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-06-01
Handle: RePEc:nbr:nberwo:4272