TY  - JOUR
AU  - Rizzo,John A.
AU  - Zeckhauser,Richard
TI  - Generic Scrip Share and the Price of Brand-Name Drugs: The Role of the Consumer
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11431
PY  - 2005
Y2  - June 2005
UR  - http://www.nber.org/papers/w11431
L1  - http://www.nber.org/papers/w11431.pdf
N1  - Author contact info:
John Rizzo
Stony Brook University
N-637 Social and Behavioral Sciences Bldg.
Stony Brook, NY 11794
E-Mail: John.Rizzo@stonybrook.edu

Richard J. Zeckhauser
John F. Kennedy School of Government
Harvard University
79 John F. Kennedy Street
Cambridge, MA  02138
Tel: 617/495-1174
Fax: 617/384-9340
E-Mail: richard_zeckhauser@harvard.edu
AB  - Generic drug utilization has risen dramatically, from 19% of scrips in 1984 to 47% in 2001, thus bringing significant direct dollar savings. Generic drug use may also yield indirect savings if it lowers the average price of those brand-name drugs that are still purchased. Prior work indicates - and we confirm - that generic competition does not induce brand-name producers to lower prices. However, consumer choices between generic and brand-name drugs could affect the average price of those brand-name drugs that are purchased.
We use nationally representative panel data on drug utilization and costs for the years 1996-2001 to examine how the share of an individual's prescriptions filled by generics affects his average out-of-pocket cost for brand-name drugs. Our principal finding is that a higher generic scrip share lowers average brand-name prices to consumers, presumably because consumers are more likely to substitute generics when the price gap is great. This effect is substantial: a 10% increase in the consumer's generic scrip share is associated with a 15.6% decline in the average price he pays for brand-name drugs.
ER  -