Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1428: The Importance of the First Generic Substitution: Evidence from Sweden

Aljoscha Janssen () and David Granlund ()
Additional contact information
Aljoscha Janssen: Singapore Management University, Postal: and Research Institute of Industrial Economics (IFN), SE-102 15 Stockholm, Sweden
David Granlund: Umea University

Abstract: We analyze changes in the willingness to substitute from prescribed pharmaceuticals to more affordable generic equivalents in response to the first experience with a substitution. Using Swedish individual-level data of prescribed and dispensed pharmaceuticals, we employ a dynamic event study and an instrumental variable approach to show that an initial substitution reduces the probability of opposing subsequent substitutions by 39 percentage points. The impact of a first substitution is especially large among elderly patients. We recommend that policy-makers target patients with a history of opposed substitution and offer additional discounts to promote substitution as long-term savings outweigh one-time costs.

Keywords: Generic Substitution; Pharmaceuticals; Health Care Costs

JEL-codes: D12; I11; I12

Language: English

39 pages, April 11, 2022

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