Treatment Effectiveness and Side Effects: A Model of Physician Learning

40 Pages Posted: 22 Aug 2012

See all articles by Tat Y. Chan

Tat Y. Chan

Washington University in St. Louis - John M. Olin Business School

Chakravarthi Narasimhan

Washington University in St. Louis - John M. Olin Business School

Ying Xie

University of Texas at Dallas

Date Written: August 22, 2012

Abstract

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

Suggested Citation

Chan, Tat Y. and Narasimhan, Chakravarthi and Xie, Ying, Treatment Effectiveness and Side Effects: A Model of Physician Learning (August 22, 2012). Available at SSRN: https://ssrn.com/abstract=2134084 or http://dx.doi.org/10.2139/ssrn.2134084

Tat Y. Chan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Chakravarthi Narasimhan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive, Campus Box 1133
Olin School of Business
St. Louis, MO 63130-4899
United States
314-935-6313 (Phone)
314-935-6359 (Fax)

Ying Xie (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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