Prescription Drug Demand Based on Mortality
This presentation is the property of its rightful owner.
Sponsored Links
1 / 23

Introduction Motivation and Hypothesis PowerPoint PPT Presentation


  • 44 Views
  • Uploaded on
  • Presentation posted in: General

Prescription Drug Demand Based on Mortality Carter Cothran Thesis Presentation for Master of Arts in Economics July 13, 2005. Introduction Motivation and Hypothesis. What determines drug prices? Are they priced efficiently?

Download Presentation

Introduction Motivation and Hypothesis

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Introduction motivation and hypothesis

Prescription Drug Demand Based on MortalityCarter CothranThesis Presentation for Master of Arts in EconomicsJuly 13, 2005

Cothran: Drug Pricing


Introduction motivation and hypothesis

IntroductionMotivation and Hypothesis

  • What determines drug prices? Are they priced efficiently?

  • Will the price of a prescription drug be influenced by the number of deaths or productivity losses it potentially avoids, in addition to other competitive influences?

  • Estimate price as a function of market competition and the harm caused by the disease it treats.

Cothran: Drug Pricing


Previous literature

Previous Literature

  • Danzon and Chao: “Does Regulation Drive out Competition in Pharmaceutical Markets?” JLE, 2000.

  • Study effects of regulation on drug prices across 7 countries.

  • Find that U.S. has greater effects of competition on prices through large generic market and first-mover advantage.

Cothran: Drug Pricing


Previous literature 2

PreviousLiterature - 2

  • Civan and Maloney: Working paper, 2004. Evidence that drug development is motivated by incidence of disease and resulting economic loss.

  • But, only for U.S. and a few other developed countries.

  • Inefficient Pricing?

Cothran: Drug Pricing


Data collection and organization sample of drugs

Data Collection and Organization Sample of Drugs

  • List of top sales and top prescriptions written for 2003 & 2004

  • Rankings from Rxlist.com.

  • Omitted drugs that were obviously not associated with fatal illnesses.

  • Therapeutic competitors, pioneer brands, & ingredient equivalents (imitators) for these drugs were added to the collection if not already listed.

Cothran: Drug Pricing


Data collection and organization prices

Data Collection and Organization Prices

  • Medco.com

    • Retail prices: average of 60,000 pharmacies

    • Formulary: price from state insurance plan

    • Information with price:

      • strength

      • package size or quantity

      • type, generic or brand

      • manufacturer of brand

Cothran: Drug Pricing


Data collection and organization 2 treatments dates and death totals

Data Collection and Organization - 2Treatments, Dates, and Death totals

  • Indications & Approval Dates: Rxlist.com, FDA label, Nursing Drug Handbook

    • Also used to categorize which drugs are competitors.

  • Mortality Data: CDC (1999 death tables)

    • Link between categories of mortality and indications; sometimes loose and sometimes very specific.

Cothran: Drug Pricing


Empirical analysis variables

Empirical AnalysisVariables

  • Price: average of price per amount of active ingredient in standard prescription.

  • Variance of this price per unit of ingredient is informative.

  • Sometimes forms can be combined; sometimes not. Average price over forms.

Cothran: Drug Pricing


Empirical analysis 2 variables

Empirical Analysis – 2Variables

  • Discount: Retail price minus formulary price divided by formulary price.

  • Age: time since approval date

    • First dates

  • Classes of Drugs: On Patent; Pioneer; Imitator

    • Tables 1, 2, and 3: Summary Statistics

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Determinants of price

Determinants of Price

  • Table 4: Regression using determinants from own-price effects

  • Examine differences among 3 types of drugs, On Patent, Pioneer, and Imitator (omitted category)

  • Not enough information for competitive influences

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Measuring competitive effects variables

Measuring Competitive EffectsVariables

  • Therapeutic Competitor Categories

    • Disease treated

    • Action that drug takes

  • Table 5: Frequency Table of Therapeutic Competitor Categories

    • 121 categories

    • Number of drugs in each

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Effects of competition

Effects of Competition

  • Competitor price measured by:

    • Average price in Therapeutic Competitor Category

    • Average price of Ingred. Equivalents for Pioneer; Therapeutic Competitor Category for On Patent

    • Fixed Effects model to capture avg price in Therapeutic Competitor Categories

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Mortality effects

Mortality Effects

  • Linking Mortality to Therapeutic Competitor Categories

  • Table 7: Summary Statistics

    • General and Specific Category Deaths

    • Death Rate: divide by total 1999 deaths

      • Alternative General Category: equals specific category deaths when general deaths are same as specific deaths.

    • Fixed Effects Values: results from regression (c ) in Table 6

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Relating mortality to price

Relating Mortality to Price

  • Table 8: Regression of Death Totals on Relative Prices for Therapeutic Competitor Categories

    • Regressions a-d use F. E. coefficient values

    • Regressions d-e use F. E. t-statistic values

Cothran: Drug Pricing


Introduction motivation and hypothesis

Cothran: Drug Pricing


Conclusions

Conclusions

  • Results offer support for using mortality as a measure of demand intensity.

  • Additional work:

    • Add more drugs (make sure that sample includes imitators if available)

    • Refine therapeutic categories

    • Refine links between therapeutic categories & mortality

Cothran: Drug Pricing


  • Login