Brand Name Preference May Relate to Product Knowledge, Say University of Chicago Economists

Published Online: Monday, August 5, 2013
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University of Chicago economists turned to pharmacists, nurses, and doctors when testing whether preference for brand or generic OTC medicines is related to knowledge.

“We came up with what is probably the simplest idea you’ve ever heard of,” said Matthew Gentzkow, Richard O. Ryan Professor of Economics at The University of Chicago, in a July 5 article featured on NPR. “Let’s just look and see if people who are well informed about these things still pay extra to buy brands.”

After surveying 6 years of purchasing data from the Nielsen Homescan panel, researchers matched the data to a survey with consumer information proxies and separate data on store-level quantities and prices. They were then able to determine the purchasing habits of consumers from various educational backgrounds, income levels, and levels of product expertise.

Their findings showed pharmacists purchased generic headache remedies 90% of the time, whereas the overall population tended to purchase generic headache remedies approximately 70% of the time, NPR reported.

“In a world where everyone was as well informed as [the] pharmacist or nurse, the market share of the brands would be much, much smaller than it is today,” Gentzkow told NPR.

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Today Reps. Doug Collins (R-Ga.) and Dave Loebsack (D-Iowa) introduced H.R. 5815, The Generic Drug Pricing Fairness Act, which creates greater transparency in how pharmacy benefit managers reimburse pharmacies for generic prescription drugs under Medicare Part D, and the Federal Employees Health Benefits Program. The National Community Pharmacists Association endorsed the bill, which goes further than legislation the same two Congressmen introduced earlier year that has the same remedies, but only applied to Medicare Part D.
“GPhA applauds FDA for taking helpful steps to address, and hopefully limit, scenarios in which some brand drug companies misuse Risk Evaluation and Mitigation Strategies programs to thwart competition from more affordable generic drugs. The ongoing abuse of REMS and REMS-like programs costs the American health system and its patients $5.4 billion annually, according to a study conducted by Matrix Global Advisors. Interestingly, as the United States market readies for biosimilars, this same study identifies $140 million in lost savings that would occur for every $1 billion in biologics sales.
Generics saved $239 billion in 2013 (a 14% increase in savings from 2012) and more than $1.46 trillion over the recent decade. Further, the Express Scripts 2013 Drug Trend Report issued in 2014 shows that since 2008, the price of brand drugs has almost doubled, but the price of generic drugs has been cut roughly in half.
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