Treatment Effectiveness and Side Effects: A Model of Physician Learning
40 Pages Posted: 22 Aug 2012
Date Written: August 22, 2012
In this paper we study how treatment effectiveness and side effects impact the prescription decision of a risk averse physician, and how detailing and patient feedback help reduce the physician’s uncertainty in these two attributes, in the Erectile Dysfunction (ED) category. To separately identify the impacts of effectiveness and side effects, we augment the observed prescription choices with a unique data on self-reported reasons for switching in our estimation. Results show that the two new drugs, Levitra and Cialis, have higher mean effectiveness than the existing drug Viagra, but physicians have large uncertainty regarding the effectiveness for Levitra and side effects for Cialis. Detailing is effective in reducing the uncertainty for effectiveness but much less so for side effects. Based on the results, we investigate the role of effectiveness and side effects in physicians’ prescription choice, and the importance of detailing for new entrants in competing with incumbent drugs.
Keywords: learning, effectiveness, side effects, physician decision, healthcare, pharmaceutical marketing
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