Biomedical Engineering Reference
In-Depth Information
states that prices of generic drugs are 30-50 % lower than brand prices, and that
these prices decrease further after introduction as the number of generic manufactur-
ers increases. In addition, generic entry may also affect branded drugs' prices. Caves
et al. (
1991
) found that prices of branded drugs fall when generics are introduced.
This could be a strategy of branded manufacturers to safeguard their market share.
However, Frank and Salkever (
1997
) and Lexchin (
2004
) found that branded drug
prices may increase when generic entry occurs. Brand-loyal customers could drive
this result, as these customers are willing to pay more for the branded drug, whereas
other customers will choose the cheap generic drugs. On average, the price of an
off-patent drug is lower than that of the patented version because of market competi-
tion. Danzon and Chao (
2000b
) find that generic competition is significant in coun-
tries that do not have strict regulations, such as the UK, the USA, and Germany.
Generic competition is much fiercer in regulated countries such as France and Italy.
7.2.2
Promoting New Treatments to Maximize Unit Sales
of a New Treatment
Pharmaceutical firms use several types of marketing tools, including free samples,
detailing visits, professional magazine advertising, and DTCA to support the launch
of new treatments. An important challenge marketing scientists have had to over-
come is how to calculate the optimal allocation of marketing investments.
When a pharmaceutical firm launches a new treatment, it typically spends the
largest portion of its marketing budget on physician detailing visits. Accordingly,
numerous marketing research studies have focused on the effectiveness of these
visits. Early endeavors by marketing scholars in this field used aggregate data to
examine the effect of detailing visits on drug sales (Lilien et al.
1981
; Parsons and
Vanden Abeele
1981
). In the past decade, several studies have used panel data to
investigate the effect of detailing visits on the demand for pharmaceutical drugs
(e.g., Kamakura et al.
2004
; Gonul et al.
2001
; Manchanda and Chintagunta
2004
;
Venkataraman and Stremersch
2007
). While some of these studies (e.g., Gonul et al.
2001
) find that detailing has a positive and significant effect on the number of pre-
scriptions, other studies find that detailing has only a very modest effect (Mizik and
Jacobson
2004
; Stremersch et al.
2013
; Venkataraman and Stremersch
2007
) or
even no effect (Rosenthal et al.
2003
) on prescriptions or sales.
One possible explanation for these contradicting findings is that brands may in
fact differ in the extent to which their detailing efforts evoke physicians' response
(Leeflang et al.
2004
). Venkataraman and Stremersch (
2007
) find that drug charac-
teristics are a source for brand-specific differences in physicians' responsiveness (as
reflected in their prescription behavior) to marketing efforts by pharmaceutical
firms. Specifically, they find that physicians tend to be more positively affected by
detailing visits when the drug is more effective or has more side effects. Typically,
detailing visits for a newly launched drug are effective, as physicians still have a
great deal of uncertainty with regard to the effectiveness, side effects, and safety of
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