`and Productivity
`
`Edited by
`
`David M. Cutler and
`Ernst R. Bemdt
`
`md Wealth
`
`Tm: University of Chicago Press
`
`Chicago and London
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` i LSENJUE u:
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`naxnuca COLLEGE LIBRARY
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`Hedonic Analysis of Arthritis Drugs
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`the most visible direct efiect of changes in quality is seen in movements in
`quantities, which has significant implications for how we should interpret
`movements in, for example, a fixed-weight price index.
`Second, these results hint at an interesting variety of nonprice competi-
`tion. Rents to producers in this market are determined initially by the level
`of prices (which to a rough approximation they set once in real terms,
`often based upon conditions prevailing in unrelated markets) and then by
`the evolution of quantities as consumers and/or their agents respond to
`exogenous changes in perceived quality. In such circumstances the role
`played by marketing and promotional activity may well be very important.
`Our analysis here is based on the generation of new information about
`product quality in the form of publication of research results in peer re-
`viewed journals by (hopefully) impartial authors. The question of how this
`information reaches practicing physicians and their patients has not been
`examined here. In future work we hope to extend our analysis of this mar-
`ket to include marketing and promotional activity by producers of these
`drugs, which may shed light on the interesting question of the relative im-
`portance of objective versus persuasive information in drug choices.
`
`References
`
`Anis, A. H., and Q. Wen. 1998. Price regulation of pharmaceuticals in Canada.
`Journal of Health Economics 17 (1): 21-38.
`Bemdt, E. R., I. M. Cockbum, and Z. Griliches. 1997. Pharmaceutical innova-
`tions and market dynamics: Tracking effects on price indexes for antidepressant
`drugs. Brookings Papers on Economic Activity, Microeconomics. 133-88.
`Bemdt, E. R., and S. N. Finkelstein. 1992. Price indexes for anti-hypertensive
`drugs that incorporate quality change: A progress report on a feasibility study.
`MIT Program on the'Pharmaceutical Industry, Working Paper no. 6-92.
`Berry, S. B. 1994. Estimating discrete-choice models of product differentiation.
`RAND Journal of Economics 25:242—62.
`Berry, S. B., J. Levinsohn, and A. Pakes. 1995. Automobile prices in market equi-
`librium. Econometrica 631841-90.
`Brewerton, D. 1994. All about arthritis. Cambridge, Mass.: Harvard University
`Press.
`Cash, J. M., and J. H. Klippel. 1994. Second-line drug therapy for rheumatoid ar-
`thritis. New England Journal of Medicine 330:l368—75.
`Felson, D. T., J. J. Anderson, and R. F. Meenan. 1990. _,The comparative efiicacy
`and toxicity of second-line drugs in rheumatoid arthritis: Results of two meta-
`analyses. Arthritis and Rheumatism 33:l449—59.
`'
`Griliches, A., and I. M. Cockbum, 1995. Generics and new goods in pharmaceuti-
`cal price indexes. American Economic Review 84:l2l3—32.
`IMS America Inc. 1980-94. National drug and therapeutic index—Drugs. Plym-
`outh Meeting, Pa.: IMS America.
`. 1980-94. National drug and therapeutic index—Diagnosi.r. Plymouth
`Meeting, Pa.: IMS America.“E.
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`?_.________T
`
`shed trial in each year,
`e-year moving average
`:t is calculated relative
`ig just the change rela.
`
`gns of the coetficicnts
`2, with increased toxic-
`
`creased efiicacy posi.
`insignificant, and cor-
`ive in model 6. A very
`tation of results from
`
`estimation to control
`ire or characteristics.
`
`d they markedly im-
`deed have systematic
`the estimated coefi‘i-
`hen we include fixed
`
`:ant variables driving
`drugs or other drug-
`
`:1y minor role in the
`linical trials relating
`nd toxicity) is statis-
`s in this market, but
`nature of RA, these
`point to some inter-
`:1 to address in this
`
`isure the impact of
`h as this one. Most
`
`g has examined the
`mge in the form of
`re technical change
`is to the intangible
`affecting perceived
`: speed, durability,
`.1is context, but the
`ittle (and are most
`irs to be quite price
`arice space. Rather,
`
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