Characteristics of Demand for Pharmaceutical Products : An Examination of Four Cephalosporins

We model demand for four cephalosporins and compute own- and cross-price elasticities between branded and generic versions of the four drugs. We model demand as a multi-stage budgeting problem, and we argue that such a model is appropriate to the multi-stage nature of the purchase of pharmaceutical products, in particular the prescribing and dispensing stages. We find quite high elasticities between generic substitutes and also significant elasticities between some therapeutic substitutes