Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 8: Consumer Information and Pharmaceutical Prices: Theory and Evidence

David Granlund () and Niklas Rudholm ()
Additional contact information
David Granlund: Department of Economics, Postal: Umeå University, SE-901 87 Umeå, Sweden
Niklas Rudholm: The Swedish Retail Institute (HUI), Postal: Regeringsgatan 60, SE-103 29 Stockholm, Sweden

Abstract: In this paper, the impact of increased information on brand name and generic pharmaceutical prices is analyzed both theoretically and empirically. The theoretical results show that an increase in information is likely to reduce the price of brand name pharmaceuticals, while the results regarding generics are less clear. In the empirical part of the paper, the introduction of the substitution reform in the Swedish pharmaceuticals market in October 2002 is used as a natural experiment regarding the effects of increased consumer information on pharmaceutical prices. The results clearly show that the reform has lowered the price of both brand name- and generic pharmaceuticals.

Keywords: Pharmaceutical industry; generic competition; generic drugs; brand name drugs

JEL-codes: D80; D83; I11; L65

32 pages, April 1, 2007

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