Generic substitution: micro evidence from register data in Norway
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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 are examined. Using an extensive dataset extracted from The Norwegian Prescription Database containing all prescriptions dispensed to individuals in February 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 in promoting generic substitution. In markets with more recent entry of generic drugs, brand-name loyalty proves to be much stronger, giving less explanatory power to our demand model.
KeywordsPharmaceutical industry Generic substitution Microdata Random utility model
JEL ClassificationsC 35 I 11 L 13
We thank Vivian Dyb for excellent research assistance, and participants at the annual National Health Economics Conference 2007 for helpful comments. We wish to acknowledge the services of the Norwegian Prescription Database in providing data. This research is supported by grants from the Norwegian Research Council. We thank two referees for constructive criticism and very helpful comments.
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