Margins and market shares: Pharmacy incentives for generic substitution

Arbeitspapier

We study the impact of product margins on pharmacies' incentive to promote generics instead of brand-names. First, we construct a theoretical model where pharmacies can persuade patients with a brand-name prescription to purchase a generic version instead. We show that pharmacies' substitution incentives are determined by relative margins and relative patient copayments. Second, we exploit a unique product level panel data set, which contains information on sales and prices at both producer and retail level. In the empirical analysis, we find a strong relationship between the margins of brand-names and generics and their market shares. This relationship is stronger for pharmaceuticals under reference pricing rather than coinsurance. In terms of policy implications, our results suggest that pharmacy incentives are crucial for promoting generic sales.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4055

Classification and Topics

• Classification: Wirtschaft ; Analysis of Health Care Markets ; Health: Government Policy; Regulation; Public Health ; Oligopoly and Other Imperfect Markets ; Chemicals; Rubber; Drugs; Biotechnology; Plastics
• Subject: pharmaceuticals ; pharmacies ; generic substitution ; Apotheke ; Pharmazeutisches Produkt ; Generika ; Markenartikel ; Ökonomischer Anreiz ; Gesundheitskosten ; Norwegen

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brekke, Kurt R. ; Holmås, Tor Helge ; Straume, Odd Rune
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/69601