Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Kurt Richard Brekke
Margins and Market Shares: Pharmacy Incentives for Generic Substitution.
(), Tor Helge Holmås
() and Odd Rune Straume
Abstract: 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. In terms of policy implications, our results suggest that
pharmacy incentives are crucial for promoting generic sales.
Keywords: Pharmaceuticals; Pharmacies; Generic Substitution.; (follow links to similar papers)
JEL-Codes: I11; I18; L13; L65; (follow links to similar papers)
36 pages, July 7, 2010
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