When your doctor prescribes medicine for you, the name of the pharmaceutical company plays a critical role. This is bad for competition and thus for the consumer, says economist Anders Munk-Nielsen whose research has inspired the Danish Competition and Consumer Authority to propose a generic prescription system.
You're at the pharmacy with a prescription in hand. You hand it over the counter and the pharmacist says:
"I have a similar product that is cheaper. Would you like that instead?"
Perhaps you are a thrifty person who agrees to the proposal - but in fact around 30% of Danes say no to the pharmacist's well-intentended proposal.
"Many consumers insist on following the doctor's "choice" of product. It may feel wrong to want to save money when a doctor has chosen a product for you. Or you may be confused by the price difference and uneasy about the situation. You know that cheaper often means worse," explains Anders Munk-Nielsen, associate professor at the Department of Economics.
He has scrutinized data from the Danish pharmaceutical market and has discovered a clear trend: the product that the doctor prescribes gets an unfair advantage compared to competitors - even when the products have exactly the same effect.
The A's raise their price
How does the doctor choose between nearly identical products, you might ask.
"When your doctor writes a prescription, she has to choose a product from a list. There can be up to ten products with the same active ingredient, but they are produced by different companies," explains Anders Munk-Nielsen and continues:
"Often the doctor has no reason to prefer one product over another. So it is natural to just choose the first. And since the list is sorted alphabetically by company name, the choice often falls on a company that starts with A."
After examining the data, Anders Munk-Nielsen found that both prices, market shares, turnover and the number of prescriptions fall in alphabetical order.
"Even among products with the active ingredient, products from companies starting with A tend to cost more than ones where the company name starts with Z. Company A uses the advantage from the alphabetical sorting on the doctor's screen to set a higher price," says Anders Munk-Nielsen.
This means that the doctor's innocent choice of company A suddenly has consequences for the consumer, who ends up wasting money.
The Competition Authority is on the case
Fortunately, the problem is easy to solve, Anders Munk-Nielsen points out:
"The doctor should be able to write the molecule and not the company name on the prescription. Then the cheapest product becomes the starting point when you're at the pharmacy, and the competition will be intensified - to the benefit of the customer," he says.
Anders Munk-Nielsen's study of the pharmaceutical market has been noticed by the Danish Competition and Consumer Authority. The authority therefore now proposes a system of so-called generic prescription, so that the molecule the patient needs will be on the prescription instead of the company's name.
