Using discrete choice experiments to explore generics substitution, brand premiums and consumer choice in pharmaceutical policy in Australia
- Publication Type:
- Thesis
- Issue Date:
- 2023
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Generic medicines play an important role in ensuring sustainable access to affordable medicines under the Australian Pharmaceutical Benefits Scheme, since they cost less while being as safe and effective as the original branded medicine. However, in Australia, allowing branded medicines to charge a ‘brand premium’ an additional fee above the co-payment, may inadvertently reduce the uptake of generic medicines.
This thesis investigated factors determining consumer choice on demand for branded and generic medicines, focusing on the role of brands and the brand premium policy. In the first instance, the study focused on exploring whether the brand premium label may act as a signal of quality to consumers, given other factors that influence decision making in a pharmaceutical market setting, such as the doctor’s prescription, the pharmacist’s recommendation, and the availability and cost of the medicine.
The second objective was to evaluate the impact on preferences for branded and generic medicines in a hypothetical scenario in which a consumer choice was limited to a single subsidised brand.
Four discrete choice experiments (DCEs) were developed and implemented using an online survey. Respondents were randomised into three groups (DCE1, DCE2 or DCE3), , with each DCE containing different information regarding the cost attribute, and the presence of a brand premium. All respondents completed DCE4, which asked respondents to make decisions in the context of the government changing the reimbursement policy and consumers being reimbursed for only one of the two presented medicines.
The results demonstrated that Australian respondents have a high preference for pharmacists’ recommendation about the brand of the medicine, irrespective of the doctor’s script. Considering the prior DCE, those who were not exposed to explicit brand premium information showed a strong positive preference for the branded medicine, compared to the negative preference of the remainder who were aware of the premium.
On average, under a scenario that limits consumer choice, the vast majority of respondents favoured the government-subsidised drug, regardless of the brand, with only a small percentage opting for the more expensive branded option. Thus, generic pricing policies that encourage greater price competition may be acceptable to consumers.
New policies can be designed to engage pharmacists and provide them with a greater capacity to inform the consumer of different options. This may encourage consumers to choose brands that cost the government less.
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