Pharmaceutical Market Competition with Price Differential.
A simulation model elucidates the micro-economic process
MJMcCann Consulting
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Ethical Pharmaceutical Products with big price differential:
Competition or Mutual Aid?

The question was "How is it that these two pharmaceutical products both stay on the market when one of them is so much cheaper than the other, yet both are about equally effective?"

We looked at the advertising, done to influence doctors (primary care physicians) who prescribe the medications, and we looked at the progress of patients whose chronic continuing illness was not curable, but for which the medication, applied topically, provided relief. We looked at demographics. Some of the patients were afflicted for years. The advertising could not and did not make claims that provided any rational basis for choice by the doctors. In any case, the variations in market share (brand share) were not well correlated with the advertising.

In quantifying the flows of money, people and messages, we found another route of communication of ideas about the qualities of the products; the patients themselves. It wasn't word of mouth, but after continued use, the patients would complain of decreasing efficacy. Their doctors (primary care physicians) would refer them to specialists, consultants, who, having in reality no more options than anyone else, would wisely (!) advise a change to the other medication. It usually had some effect on the patient.
More importantly it sent a strong message to the original doctor (who would normally see only very few such patients) ... the other product is better! So the two products sustained each other and since most of the prescriptions were paid for without any direct cost to the patient or doctor, the price was not the issue.

You might also like to look at the retail TV advertising model story, and the market dynamics in the automobile (motor car) market model.

Other Experience
My experience with problems over these time scales is that people rarely expand their time horizons far enough to see the whole picture. Even if they try, they tend to miss interaction effects and think more in terms of extrapolating, sometimes with statistical models, from the recent past.
My (MJMcC) observation is that the demographics and the compelling force of reality can be quantified to make a big improvement in perception. If you are dealing with a market sector that needs some explanation, you only have to contact me, in confidence, of course, to see if I can help!

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Invitation. McCann can help if you have a design or operational problem that needs some technical support that is outside your team's experience, some quantitative assessment of what is really the cause of the difficulties, some design alternatives or just a fresh look by an intelligent interrogator.
If you have a problem with the behaviour of a market sector, plant, process or item of equipment and would like to get a quantitative handle on it to improve yield or optimise performance, then contact me.I'm always ready to give a little time to discuss a new puzzle, in confidence, of course. We'll only worry about fees when there is some defined work. I can be flexible about how I work with you.
Dr M.J.McCann,
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