SSE/EFI Working Paper Series in Economics and Finance
No 460:
The Impact of Physician Preferences and Patient Habits on the Diffusion of New Drugs
Magnus Johannesson ()
and Douglas Lundin
Abstract: We study the choice of drug for the treatment of high
blood pressure (hypertension) in Sweden between 1988-1994. During this time
period calcium antagonists and ACE-inhibitors increased their market shares
at the expense of the older drugs diuretics and beta-blockers. We use a
prescription micro dataset where both patients and physicians can be
followed over time---an important feature since it allows us to study the
impact of physician preferences and patient habits on the choice of drug.
The choice of drug is unaffected by relative prices, indicating a moral
hazard problem on the Swedish drug market characterized by a high degree of
third-party financing. Physician preferences, measured as physician
prescription history, are important for the choice of drug among new
patients. Among existing patients the effect of physician preferences is
mitigated by patient habit formation which slows down the diffusion of new
drugs. Without habit effects the market share of calcium antagonists and
ACE-inhibitors would have been more than 50% higher during our observation
period (30% instead of the observed 19%).
Keywords: pharmaceuticals; physician behavior; habit formation; mixed logit estimator; (follow links to similar papers)
JEL-Codes: C25; I11; L10; O33; (follow links to similar papers)
35 pages, September 12, 2001, Revised August 12, 2002
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