Bad Medical News and the Aversion of Generic Drugs

Abstract

Policies promoting generic drug adoption capture the interest of policy makers and insurers because they can deliver large savings without sacrificing quality. These policies are nevertheless met with resistance from the public, who perceive generics as inferior substitutes for brand name drugs. Building on prior literature showing that negative emotions can lead to reduced risk-taking, we argue that ``bad medical news'' can fuel such generic-averse attitudes. By raising alarm about their health condition, bad medical news may prompt patients to favor brand name drugs as means to safeguard their health. Our primary evidence exploits bad medical news originating from LDL cholesterol testing, where receiving a 130 mg/dL ("borderline high") result means bad medical news compared with receiving a 129 mg/dL ("near optimal") result. In a sample covering patients' all prescription drug choices (across drug classes), we find that patients receiving the bad news treatment experience a 1.3% relative reduction in generic choice propensity after the test. This finding is reinforced by a secondary analysis that incorporates the similar context of bad news arising from Hemoglobin A1c (blood sugar) testing. Consistent with generics being perceived as inferior in general, the effect operates beyond drugs of direct clinical relevance to each test.

Note:
Funding Information: We gratefully acknowledge a Pilot Grant from the Hopkins Business in Health Initiative.

Declaration of Interests: None to declare.

Ethics Approval Statement: This research did not involve human subjects hence ethical reviews were not sought out.

Keywords: Healthcare, Behavioral Marketing, Natural Experiments, Generic Drugs

JEL Classification: I10, M30, M38