Essays on the economics of drug pricing and advertising

This dissertation consists of three essays related to the field of health economics. The first essay analyzes the relationship between the size of the Medicaid market share (defined as the proportion of Medicaid reimbursed prescriptions dispensed in retail pharmacies for a specific drug) and the price of the drug. The main conclusion of this study is that as the Medicaid market share increases the pharmaceutical companies have an incentive to increase the price of the drug, to the detriment of the patients who have private or no insurance coverage.;The second part of the dissertation examines the connection that exists between advertising and physicians' prescribing behavior. A multinomial logit model is used to study the influence of direct-to-consumer advertising (DTCA) on the outcome of a visit to the doctor. Using data from a survey about the patients' attitudes toward advertising our analysis concludes that the likelihood that the physician will prescribe a drug is a function of the consumer's health status, his likelihood that he will initiate a conversation with the physician, his exposure to DTCA, knowledge of his health status and other demographic characteristics.;The final chapter considers the link between different types of advertising and the performance of a drug on the market, where the performance of a drug is defined as the drug's market share within a therapeutic class. We also evaluate the influence of advertising on the total size of the market for a specific therapeutic category. The empirical results show that DTCA has an effect on both the size of the market for a therapeutic class and on the size of the market share for an individual drug. Also, compared to DTCA, the number of contacts between sales representatives and physicians has more influence in determining the size of the individual market share for a drug.