Generic and branded pharmaceutical pricing: Competition under switching costs
Publication Type
Journal Article
Publication Date
7-2023
Abstract
This article examines pricing in pharmaceutical markets where branded products face competition from generics. After providing evidence for brand premia and switching costs using prescription-level and matched socioeconomic data for the entire Swedish population, I estimate a dynamic oligopoly model and evaluate counterfactual policies that reduce the impact of frictions on pricing. Lengthening the procurement period reduces the impact of switching costs on prices. The policy increases prices on average, but more so for individuals with infrequent consumption, high education and income. In a counterfactual where brand choice decisions are moved from patients to medical experts, prices fall substantially.
Keywords
Drugs, pharmaceutical industry, counterfactual policies, pricing, Sweden
Discipline
Behavioral Economics | Health Economics | Pharmacy and Pharmaceutical Sciences
Research Areas
Applied Microeconomics
Publication
Economic Journal
Volume
133
Issue
653
First Page
1937
Last Page
1967
ISSN
0013-0133
Identifier
10.1093/ej/uead021
Publisher
Oxford University Press (OUP): Policy F - Oxford Open Option D
Citation
JANSSEN, Aljoscha.
Generic and branded pharmaceutical pricing: Competition under switching costs. (2023). Economic Journal. 133, (653), 1937-1967.
Available at: https://ink.library.smu.edu.sg/soe_research/2681
Copyright Owner and License
Authors
Additional URL
https://doi.org/10.1093/ej/uead021