Characteristics of demand for pharmaceutical products: an examination of four cephalosporins

Article Abstract:

The economic aspects of the pharmaceutical industry is analyzed using a model of demand for four cephalosporins and computing own-and cross-price elasticities between branded and generic versions. The demand is modeled as a multistage budgeting problem to appropriately show particularly the prescribing and dispensing stages of buying pharmaceutical products. Also, the analysis arrived at a conclusion that there is a fairly high demand elasticity between generic substitutes or products with chemically the same active ingredients produced by different companies.

Cephalosporin Preparations, Models, Economic aspects, Marketing, Cephalosporins, Demand (Economics)

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Generics and new goods in pharmaceutical price indexes: comment

Article Abstract:

An analysis of differing CES and translog price indexes for generic drugs reveals that the alternative measure of the CES index using elasticity substitution from a demand equation is more useful than the CES and translog indexes. An analysis of the study by Griliches and Cockburn noting differences in price indexes also reveals that the index formulated by the two researchers is useful in price indexes where the upper bound can be easily calculated but is inapplicable to products where the upper bound is not readily available.

Economics, Research and Development in the Social Sciences and Humanities, Analysis, Price indexes

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Generics and new goods in pharmaceutical price indexes: reply

Article Abstract:

Using elasticity of substitution from a demand equation to compute for generic drug price indexes requires the explicit estimation of demand structures and the resulting equation is sensitive to functional form assumptions. Moreover, available price data prior to patent expiration and generic introduction should be computed for with demand estimation taken into account and pursued in parallel when available.

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