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

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1093/ej/uead021

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