Entry of New Drugs and Doctor's Prescriptions

Abstract

This paper is about entry of new drugs in pharmaceutical markets. More specifically, I analyze the diffusion of new drugs among doctors. My empirical analysis uses non-parametric duration models, which are flexible enough to identify enough to identify the most important covariates influencing the doctors' adoption decisions. My results speak to issues such as why generic drugs do not have large market shares in post-patent drug markets. When I analyze entry of bio-equivalent products, I find that the doctors' past dispersion across drugs in a therapeutic market is the best predictor of the likelihood of adoption. When a new presentation form is introduced by an incumbent firm, the doctors who extensively prescribed the brand in the other presentation forms are the ones most likely to adopt the new drug. Finally, I find that doctors are nor firm-loyal in their prescribing behavior across therapeutic markets.