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

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

Department of Economics and Statistics Cognetti de Martiis. Working Papers from University of Turin

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.

Date: 2011-11
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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) Downloads
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