Information, Learning, and Drug Diffusion: The Case of Cox-2 Inhibitors

49 Pages Posted: 18 Aug 2008 Last revised: 31 Jul 2012

See all articles by Pradeep K. Chintagunta

Pradeep K. Chintagunta

University of Chicago

Renna Jiang

University of California, Davis - Graduate School of Management

Ginger Zhe Jin

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2008

Abstract

The recent withdrawal of Cox-2 Inhibitors has generated debate on the role of information in drug diffusion: can the market learn the efficacy of new drugs, or does it depend solely on manufacturer advertising and FDA updates? In this study, we use a novel data set to study the diffusion of three Cox-2 Inhibitors ? Celebrex, Vioxx and Bextra ? before the Vioxx withdrawal. Our study has two unique features: first, we observe each patient?s reported satisfaction after consuming a drug. This patient level data set, together with market level data on FDA updates, media coverage, academic articles, and pharmaceutical advertising, allows us to model individual prescription decisions. Second, we distinguish across-patient learning of a drug?s general efficacy from the within-patient learning of the match between a drug and a patient. Our results suggest that prescription choice is sensitive to many sources of information. At the beginning of 2001 and upon Bextra entry in January 2002, doctors held a strong prior belief about the efficacy of Celebrex, Vioxx, and Bextra. As a result, the learning from patient satisfaction is gradual and more concentrated on drug-patient match than on across-patient spillovers. News articles are weakly beneficial for Cox-2 drug sales, but academic articles appear to be detrimental. The impact of FDA updates is close to zero once we control for academic articles, which suggests that FDA updates follow academic articles and therefore deliver little new information to doctors. We find that drug advertising also influences the choice of a patient?s medication. A number of counterfactual experiments are carried out to quantify the influence of information on market shares.

Suggested Citation

Chintagunta, Pradeep K. and Jiang, Renna and Jin, Ginger Zhe, Information, Learning, and Drug Diffusion: The Case of Cox-2 Inhibitors (August 2008). NBER Working Paper No. w14252. Available at SSRN: https://ssrn.com/abstract=1231700

Pradeep K. Chintagunta

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

Renna Jiang

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

Ginger Zhe Jin (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3484 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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