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Title:A probability approach to pharmaceutical demand and price setting: Does the identity of the third-party payer matters for prescribing doctors? PDF Logo
Authors:Dalen, Dag Morten
Locatelli, Marilena
Sorisio, Enrico
Strøm, Steinar
Issue Date:2011
Series/Report no.:CESifo working paper: Industrial Organisation 3643
Abstract:TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8 per cent of total pharmaceutical sale in Norway. Novelty of the paper is to examine, with the use of a unique natural policy experiment in Norway, to what extent the price responsiveness of prescription choices is affected when the identity of the third-party payer changes. The three dominating drugs in this market, Enbrel, Remicade, and Humira, are substitutes, but have had different and varying funding schemes - hospitals and the national insurance plan. A stochastic structural model for the three drugs, covering demand and price setting, is estimated in a joint maximum likelihood approach. We find that doctors are more responsive when the costs are covered by the hospitals compared to when costs are covered by national insurance.
Subjects:pharmaceuticals
discrete choice model
funding-schemes
JEL:C35
D43
I18
L11
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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