The effect of inertia on brand-name versus generic drug choices

Yuki Ito, Konan Hara and Yasuki Kobayashi

Journal of Economic Behavior & Organization, 2020, vol. 172, issue C, 364-379

Abstract: Consumers’ tendency to repurchase products is called inertia. This study investigates inertia in brand-name and generic drug choices, which is manifested by the slow and limited adoption of generic drugs despite their lower prices. We use claims data from Japan and focus on the generic entry of a widely prescribed lipid-lowering drug, Pitavastatin. Observing the periods before and after the generic entry gives us a unique opportunity to identify the effect of inertia. We construct a choice model that incorporates price, heterogeneous brand preferences, and inertia to quantify each component's magnitude. We find that both inertia and heterogeneity in brand preferences have substantial effects. Counterfactual simulations suggest that a nudging policy that removes inertia from previous brand-name users, such as by alerting the patients to switch to cheaper generic drugs, may have substantial effects and enable patients to choose optimally.

Keywords: Pharmaceuticals; Generic drugs; Inertia; Nudge; Regulation (search for similar items in EconPapers)
JEL-codes: D83 I11 I18 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268119304147
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:172:y:2020:i:c:p:364-379

DOI: 10.1016/j.jebo.2019.12.022

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().