Generic drugs in Spain: price competition vs. moral hazard

Ivan Moreno-Torres ()
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Ivan Moreno-Torres: Competition Authority of Catalonia (ACCO), Generalitat de Catalunya; Center for Research in Economics and Health (CRES), Universitat Pompeu Fabra; Governments and Markets (GiM-IREA), Universitat de Barcelona

No XREAP2011-04, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

Abstract: This paper examines competition between generic and brand-name drugs in the regulated Spanish pharmaceutical market. A nested logit demand model is specified for the three most consumed therapeutic subgroups in Spain: statins (anticholesterol), selective serotonin reuptake inhibitors (antidepressants) and proton pump inhibitors (antiulcers). The model is estimated with instrumental variables from a panel of monthly prescription data from 1999 to 2005. The dataset distinguishes between three different levels of patients’ copayments within the prescriptions and the results show that the greater the level of insurance that the patient has (and therefore the lower the patient’s copayment), the lower the proportion of generic prescriptions made by physicians. It seems that the low level of copayment has delayed the penetration of generics into the Spanish market. Additionally, the estimation of the demand model suggests that the substitution rules and promotional efforts associated with the reference pricing system have increased generic market share, and that being among the first generic entrants has an additional positive effect.

Keywords: pharmaceutical industry; generic competition; copayment; moral hazard (search for similar items in EconPapers)
JEL-codes: I11 I18 L13 L65 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2011-05, Revised 2011-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2011-04.pdf First version, 2011 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2011-04.pdf Revised version, 2011 (application/pdf)

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