Choosing Among Competing Blockbusters: Does the Identity of the Third-Party Payer Matter for Prescribing Doctors?

30 Pages Posted: 30 Oct 2010  

Dag Morten Dalen

BI Norwegian Business School - Department of Economics

Enrico Sorisio

PharmaNess; University of Oslo - Centre for Technology, Innovation and Culture

Steinar Strom

University of Oslo; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 28, 2010

Abstract

TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8% of total pharmaceutical sale in Norway. With use of a unique natural policy experiment in Norway, this paper examines to what extent the identity of the third-party payer affects doctors’ choice between the three available drugs. We are able to investigate 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. We find that treatment choices are price responsive, and that the price response is considerably higher when the doctor’s affiliated hospital covers the cost instead of a traditional fee-for-service insurance plan. When the doctors’ hospitals are covering the cost of this treatment instead of insurance the total cost of treatment is significantly reduced.

Keywords: pharmaceuticals, discrete choice model, funding-schemes

JEL Classification: C35, D43, I18, L11

Suggested Citation

Dalen, Dag Morten and Sorisio, Enrico and Strom, Steinar, Choosing Among Competing Blockbusters: Does the Identity of the Third-Party Payer Matter for Prescribing Doctors? (October 28, 2010). CESifo Working Paper Series No. 3227. Available at SSRN: https://ssrn.com/abstract=1699126

Dag Morten Dalen

BI Norwegian Business School - Department of Economics ( email )

N-0442 Oslo
Norway
+47 46410774 (Phone)

Enrico Sorisio

PharmaNess ( email )

Edificio 5
Pula, CA 09123
Italy

University of Oslo - Centre for Technology, Innovation and Culture ( email )

Oslo
Norway

Steinar Strom (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Oslo ( email )

Ragnar Frisch Centre for Economic Research
N-0317 Oslo
Norway

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