The Role of Information in the Diffusion of New Pharmaceuticals: The Case of Statins

Posted: 22 Jun 2007

See all articles by Victoria Serra

Victoria Serra

London School of Economics & Political Science (LSE)

Alistair McGuire

London School of Economics & Political Science (LSE)

Date Written: June 2007

Abstract

Technological change in the health care market over the past decades has been rapid, broadening the capacity of patient treatment. One manifestation of this technological change is the number of drugs, surgical procedures and medical devises that are introduced every year in the global health care market. However, the introduction of such innovations does not necessarily lead to instantaneous widespread diffusion. The uptake of new medical technologies is characterised by uncertainty regarding the medical innovation. The degree of uncertainty will gradually decrease as users become more familiar with the technology through the use of the information available regarding the innovation attributes. There are different sources that provide physicians with the information on the efficacy of medical technology. Additionally, there are also other elements of the health care system where doctors operate that are likely to determine the uptake of new pharmaceuticals.

The aim of the paper is to analyse quantitatively the role of informational factors in the diffusion of new pharmaceuticals, with special emphasis on consumption externalities and the process of "learning by prescribing". The diffusion process is considered as a dynamic process of learning characterised by informational flows that give users the information needed to convert availability into widespread adoption of the new drug. As an example, we analyse the uptake of statins within the primary care sector in the UK. The organisation of clinical practices differs in both countries and it is hypothesised that differences in the incentives provided by the system will affect the diffusion path. The study first examines the diffusion process at the therapeutical level and then moves to examine diffusion at the molecule level. Because there are observed differences in the prescription of molecules that are close substitutes the paper aims to analyse how differences in the perception of product and information may determine the diffusion pace.

Dynamic panel data models, to capture the dynamic elements of the diffusion process, are used to analyse the determinants of the diffusion of statins, a class of lipid-lowering drugs introduced into the market in the late 80s. Statins are highly effective in lowering cholesterol levels and have been shown to be highly effective in the primary and secondary prevention of cardiovascular and cerebrovascular disease. Prescription data from 1991 to 2004 collected at the practice level forms the basis of the analysis. The results confirm that the diffusion process is dictated by the presence of consumption externalities and learning process. Organisational factors also shape physician's prescription behaviour. There is also evidence of some degree of product differentiation at the molecule level generating first-mover advantage in the diffusion process. This paper studies the diffusion process at the micro level and identifies the factors driving the uptake of new pharmaceuticals. Hence, the research provides with the elements that could be modified when policies aimed to influence diffusion are under consideration.

Suggested Citation

Serra, Victoria and McGuire, Alistair, The Role of Information in the Diffusion of New Pharmaceuticals: The Case of Statins (June 2007). iHEA 2007 6th World Congress: Explorations in Health Economics Paper, Available at SSRN: https://ssrn.com/abstract=994895

Victoria Serra (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Alistair McGuire

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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