Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69601
Authors: 
Brekke, Kurt R.
Holmås, Tor Helge
Straume, Odd Rune
Year of Publication: 
2012
Series/Report no.: 
CESifo Working Paper: Industrial Organisation 4055
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. This relationship is stronger for pharmaceuticals under reference pricing rather than coinsurance. In terms of policy implications, our results suggest that pharmacy incentives are crucial for promoting generic sales.
Subjects: 
pharmaceuticals
pharmacies
generic substitution
JEL: 
I11
I18
L13
L65
Document Type: 
Working Paper

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