The Demand for Post-Patent Prescription Pharmaceuticals

This paper examines why physicians continue to prescribe trade- name drugs when less expensive generic substitutes are available. I utilize a data set on physicians, their patients, and the multi-source drugs prescribed to study the prescription habits of physicians in prescribing generic and trade-name drugs. The results indicate that almost all physicians prescribe both types of drugs to their patients. There is, however, persistence in the prescription behavior of physicians, so that some physicians are more likely to prescribe trade-name drugs, while others more often prescribe generics. While much of this persistence cannot be explained by observable characteristics of the physician or the physician's patients, patients who are treated by physicians with large numbers of HMO or pre-paid patients are more likely to be prescribed generics, and there is wide regional variation in the propensity of physicians to prescribe generic drugs. The results are most consistent with an explanation of physicians' prescription behavior based on habit persistence.