Promotion Spillovers: Drug Detailing in Combination Therapy

Marketing Science, Forthcoming

58 Pages Posted: 8 Mar 2014 Last revised: 29 Jul 2016

See all articles by Hongju Liu

Hongju Liu

Peking University - Guanghua School of Management

Qiang Liu

Mitchell E. Daniels, Jr School of Business, Purdue University

Pradeep K. Chintagunta

University of Chicago

Date Written: 2016

Abstract

This paper examines the spillover effects of promotions when products from different firms are consumed in a bundle. Using data from the HIV/AIDS category, a canonical example of combination therapy, we estimate a hierarchical Bayesian logit model across treatment regimens and show that detailing for one drug can increase demand for other drugs that are often combined with the focal drug. Such spillover effects could lead to free riding by the drugs benefitting from the spillover. We investigate the managerial and policy implications of detailing spillover effects via counterfactual policy simulations based on a dynamic oligopoly game of detailing. For managers, we show how firms can internalize the spillover effects and reduce the incentive for free riding. For policy makers, the implications of our findings relate to detailing restrictions that are often proposed on branded drugs. These restrictions aim to increase social welfare by encouraging the use of generic drugs. However, in combination therapies generic drugs may actually benefit from the detailing of complementary branded products. If detailing was curtailed, this may adversely affect prescriptions of the generic drugs as well which runs counter to policy makers’ objectives of encouraging usage of generic drugs.

Keywords: pharmaceutical marketing; combination therapy; spillover; free riding; dynamic oligopoly game

Suggested Citation

Liu, Hongju and Liu, Qiang and Chintagunta, Pradeep K., Promotion Spillovers: Drug Detailing in Combination Therapy (2016). Marketing Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2406363 or http://dx.doi.org/10.2139/ssrn.2406363

Hongju Liu (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Qiang Liu

Mitchell E. Daniels, Jr School of Business, Purdue University ( email )

403 Mitch Daniels Blvd.
West Lafayette, IN 47907
United States

Pradeep K. Chintagunta

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

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