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Information and diffusion of new prescription drugs

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This article examines the role of different product information flows on the diffusion of new pharmaceuticals. Given the innovative nature of pharmaceutical drugs and their impact on health care expenditure there is a surprisingly small literature devoted to this topic. Some information flow mechanisms have been examined individually in the literature, but very few have captured the simultaneous impact of these mechanisms on up-take and diffusion. This article uses the up-take of statins as an example. Diffusion of this therapeutical group is expressed as a function of four specific informational channels: self-experience, consumption externalities, scientific evidence and marketing. In addition to this, the influence of economic factors is tested to examine whether they have any role in drug diffusion. Prescription data from over 130 General Practitioners (GP) practices in the UK during 1991–2004 are used to test the econometric specification applying dynamic panel data methods. Results suggest individual self-experience and clinical evidence are major factors promoting diffusion, while there is an inverse relationship with GP practice size and diffusion. Having controlled for these factors financial incentives and marketing appear to play little role.

Keywords: I11; I18; L65; information; new prescription drugs; system GMM estimator; technology diffusion

Document Type: Research Article


Affiliations: 1: Department of Economics,City University, Northampton SquareLondon,EC1V 0HB, UK 2: LSE Health,London School of Economics and Political Science, Cowdray House, Houghton StreetLondon WC2A 2AE, UK

Publication date: May 1, 2013

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