Measuring the Informative and Persuasive Roles of Detailing on Prescribing Decisions

1
Measuring the Informative and Persuasive Roles of
Detailing on Prescribing Decisions

• Andrew Ching
• Masakazu Ishihara
• Rotman School of Management
• University of Toronto

2
Pharmaceutical Detailing

• Detailing sales reps from drug manufacturers
  visit doctors to discuss compliance information,
  side-effects, and efficacy studies.
• In 2003, detailing costs 8 billion dollars
  journal advertising costs 0.46 billion dollars
  direct-to-consumer (DTC) advertising costs 3.2
  billion dollars.
• How does detailing affects demand?
• Informative and reminding roles of detailing
• Persuasive roles or bribery role

3
Motivation

• Whether detailing is persuasive or informative is
  a hotly debated topic.
• If detailing is mainly persuasive, policies of
  restricting detailing activities may be
  justified.
• If detailing is mainly informative, then it
  simply helps physicians to make informed choices.
• In general, it is hard to separately identify
  them.

4
Research Objectives

• Develop a structural model of physician demand
  that incorporates both informative and persuasive
  effects of detailing.
• Provide evidence on the relative importance of
  these two effects.
• Use the model to understand how the effectiveness
  of demand changes with the information set.

5
Identification strategy

• Sometimes two drug companies sign a co-marketing
  agreement to market a drug - the same chemical is
  marketed by two companies under two different
  brand-names.
• Identification assumption The informative
  component of detailing is chemical specific,
  while the persuasive component is brand-specific.
• Their relative demand of these two drugs should
  allow us to identify the persuasive component of
  detailing.
• The total demand for these two drugs will then
  allow us to identify the informative component.

6
How to model the effect of detailing

• Persuasive effect detailing goodwill stock in
  physicians utility function.
• Informative effect
• Learning
• Detailing goodwill stock reminds physicians the
  most updated information about drugs.

7

• Many serious Adverse Drug Reactions (ADRs) are
  discovered only after a drug has been on the
  market for years. Only half of newly discovered
  serious ADRs are detected and documented in the
  Physicians Desk Reference within 7 years after
  drug approval.
• Lasser et al. (2002) Journal of American Medical
  Association.

8
Number of active drugs in Cardiovasculars

• It is hard for physicians to keep track of the
  latest information about all the drugs.
• Some physicians may be busy and rely on the
  information provided by detailing.
• Some physicians rely on opinion leaders.

9
Literature Review

• Detailing can influence demand (reduced-form
  models)
• Leffler (1981), Hurwitz and Caves (1988), Berndt,
  Bui, Lucking-Reiley and Urban (1997), Rizzo
  (1999), Gonul et al. (2001), Wosinska (2002),
  Azoulay (2002), etc.
• Models on choice under uncertainty Erdem and
  Keane (1996) assume consumers learn via their own
  experience signals, firms know the true quality
  and use advertising to provide consumers with an
  alternative source of noisy signals.
• Papers related to EK Ackerberg(2003),
  Israel(2004), Crawford and Shum(2006) and
  Ching(2000), etc.
• Pharmaceutical Marketing Mukherji (2003),
  Narayanan, Manchanda, and Chintagunta (2005).

10
Model

• Agents physicians, patients, and a
  representative opinion leader. There are J
  products.
• There are J products and one outside alternative
  (0).
• Two product characteristics price (pj), and
  quality (qj).
• Let I(t) (I1(t),,IJ(t)), be the information
  sets for q. It is maintained by the
  representative opinion leader.
• Physicians are either well-informed about drug j
  (Ij(t)), or uninformed about drug j (Ij), where
  Ij is the initial prior for qj.

11
Bayesian updating of the public information set

• Experience signal qijt qj dijt,
• where dijt N(0, s2d).
• Initial prior for qj N(qj, s2).
• Expected quality
• EqjI(t1) EqjI(t) ?j(t)(qjt
  EqjI(t)),
• where qjt is the sample mean of experiences
  signals revealed for product j in period t.
• Perception variance
• s2j(t1) 1 / (1/s2j(t) ?njt/s2d),
• where njt is the quantity sold for drug j in
  time t
• 0lt?lt1, is a scaling factor.

12
Physicians Choice

• Patient is utility of consuming drug j
• uijt a1 - exp(-rqijt) - pppjt eijt.
• If physician h is well-informed about drug j, his
  expected utility of choosing drug j for patient i
  will be
• EUhijIj(t)
• aj - exp(-rEqjIj(t)-1/2r2(s2dsj2(t))) -
  pppjt
• ? Gjtp eijt,
• where Gjtp (1- FI) Gjt-1p Djt ,is the
  persuasive goodwill stock.

13
Physicians Choice (contd)

• If physician h is uninformed about drug j,
• EUhijIj
• a1 - exp(-rqj-1/2r2(s2d s2)) - pppjt
• ? Gjtp eijt.
• First choose inside goods vs. outside good, and
  then choose one of the inside goods.

14
Measure of well-informed physicians

• Let Mjt be the measure of well-informed
  physicians about drug j at time t.
• Let GjtI be the detailing goodwill stock, and FI
  be the depreciation rate.
• GjtI (1- FI) Gjt-1I Djt.
• Mjt exp(ß0 ß1 GjtI) / (1exp(ß0 ß1 GjtI)).

15
Marginal return of detailing

• Three factors that affect the marginal return of
  detailing
• Effectiveness of detailing on building the
  measure of well-informed physicians
• Changes in the choice probability of physicians
  who switch from uninformed to informed depends
  on I(t)
• Measure of well-informed physicians for opponent
  drug.

16
Data

• Monthly Canadian data on detailing, revenue and
  number of prescriptions from March 93 to Feb 99
  for ACE-inhibitor with diuretic from IMS Canada.
• Why Canada?
• Subject to price regulation Patented Medicine
  Prices Review Board.
• Why ACE-inhibitor with diuretic?
• No Direct-to-consumer advertising.
• Merck and AstraZeneca sign a co-marketing
  agreement to market Prinzide and Zestoretic,
  respectively. Prinzide and Zestoretic use
  exactly the same chemicals.
• Only three dominant drugs (Vaseretic, Zestoretic
  and Prinzide).
• Market size ACE-inhibitors, ACE-inhibitors w/
  diuretic, and Diuretics, Thiazide.

17
Summary Statistics
18
(No Transcript)
19
(No Transcript)
20
Estimates of learning parameters
Estimate s.e.
Initial prior mean q1(vaseretic) -23.94 3.35
Initial prior mean q2(zestoretic/prinzide) -24.88 3.92
Initial prior variance s2 0.45 0.15
True mean quality, q1 0
True mean quality, q2 14.29 0.52
sd2 0.84 0.21
21
Preference parameters estimates
Estimates s.e.
alpha(vaseretic) -0.03 0.08
alpha(zestoretic) 0.04 0.01
alpha(prinzide) 0
alpha(outside) 2.83 0.18
gamma (persuasive effect) 2.6e-06 3.4e-07
r 0.04 0.004
22
Detailing stock parameters
Estimates s.e.
Persuasive depreciation, Fp 0.077 0.005
Informative depreciation, FI 0.013 0.006
Beta_0 -2.04 0.06
Beta_1 (informative effect) 1.5e-05 3.0e-6
23
(No Transcript)
24
(No Transcript)
25
(No Transcript)
26
(No Transcript)
27
(No Transcript)
28
Two counterfactual experiments

• What happens to the diffusion rate
• (i) if we eliminate the informative component of
  detailing (i.e., set ß1 0).
• (ii) if we eliminate the persuasive component of
  detailing (i.e., set ?0).

29
(No Transcript)
30
(No Transcript)
31
Conclusion

• We find evidence that both persuasive and
  informative effects of detailing are presence and
  important in ACE-inhibitor with Diuretic market.
• The depreciation rate of the persuasive goodwill
  stock appear to be higher than that of
  informative goodwill stock.
• Detailing could be endogenous. Need to check
  robustness.