Innovation and market dynamics in the EPO market

In this paper we study the demand and supply of erythropoietin in four Nordic countries, using an econometric model based on discrete choice and a random utility model. It measures the effect of price changes as well as the loyalty of patients and physicians to a drug. Our main aims are to estimate demand for EPO and to determine the degree of competition in this Nordic market. The main motivation for this paper is to analyze the impact of product innovation on market power and welfare, e.g. on consumer and producer surplus. The product innovation is the entry of Aranesp in the Nordic market.Discrete choice; demand for pharmaceuticals; monopolistic competition; EPO

Innovation and market dynamics in the EPO market

We have estimated the demand of erythropoietin (EPO) on market data from the Nordic countries. Assuming that prices are set in a Nash-Bertrand game we determine the degree of competition in this Nordic market. We also report the impact of product innovation on welfare, e.g on consumer and producer surplus. The product innovation is the entry of Aranesp in the Nordic market. We find a positive effect related to the introduction of Aranesp in the EPO market. The high increase in consumer surplus however seems not to be accompanied by a great increase in producer surplus, whose growth is slight. Some time after the introduction of the innovation, the surplus growth does not seem to increase, it remains more or less the same (or decreases a bit). An important conclusion in our paper is that although there are few firms competing in the Nordic market for EPO, the estimated long run market power is low

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

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.pharmaceuticals, discrete choice model, funding-schemes

A Probability Approach to Pharmaceutical Demand and Price Setting: Does the Identity of the Third-Party Payer Mattersfor Prescribing Doctors?

TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8 per cent of total pharmaceutical sale in Norway. Novelty of the paper is to examine, with the use of a unique natural policy experiment in Norway, 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. A stochastic structural model for the three drugs, covering demand and price setting, is estimated in a joint maximum likelihood approach. We find that doctors are more responsive when the costs are covered by the hospitals compared to when costs are covered by national insurance.pharmaceuticals, discrete choice model, funding-schemes

Choosing among competing blockbusters: Does the identity of the third-party payer matter for prescribing doctors?

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

A probability approach to pharmaceutical demand and price setting: Does the identity of the third-party payer matters for prescribing doctors?

TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8 per cent of total pharmaceutical sale in Norway. Novelty of the paper is to examine, with the use of a unique natural policy experiment in Norway, 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. A stochastic structural model for the three drugs, covering demand and price setting, is estimated in a joint maximum likelihood approach. We find that doctors are more responsive when the costs are covered by the hospitals compared to when costs are covered by national insurance

Does the identity of the third-party payer matter for prescribing doctors?

TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with threeblockbusters accounting for 8 per cent of total pharmaceutical sale in Norway. Novelty of the paper is to examine, with the use of a unique natural policy experiment in Norway, 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. A stochastic structural model for the three drugs, covering demand and price setting, is estimated in a joint maximum likelihood approach. We find that doctors are more responsive when the costs are covered by the hospitals compared to when costs are covered by national insuranc

Innovation and market dynamics in the EPO market

We have estimated the demand of erythropoietin (EPO) on market data from the Nordic countries. Assuming that prices are set in a Nash-Bertrand game we determine the degree of competition in this Nordic market. We also report the impact of product innovation on welfare, e.g on consumer and producer surplus. The product innovation is the entry of Aranesp in the Nordic market. We find a positive effect related to the introduction of Aranesp in the EPO market. The high increase in consumer surplus however seems not to be accompanied by a great increase in producer surplus, whose growth is slight. Some time after the introduction of the innovation, the surplus growth does not seem to increase, it remains more or less the same (or decreases a bit). An important conclusion in our paper is that although there are few firms competing in the Nordic market for EPO, the estimated long run market power is low.Discrete choice; demand for pharmaceuticals; monopolistic competition; EPO

A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics A Probability Approach to Pharmaceutical Demand and Price Setting: Does the Identity of the Third-Party Payer Matters for Prescribing Doctors? A Probability A

A probability approach to pharmaceutical demand and price setting: Does the identity of the third-party payer matters for prescribing doctors