Effect of product line breadth on price - a hedonic analysis of cardiovascular drugs

Abstract

An analysis of the prices of a generic drug manufactured by various different pharmaceutical companies and marketed under different brands shows considerable variation in the prices. This paper explores the possible reason for existence of a difference in the pricing when the underlying ‘utility’ is the same by deploying a ‘quality’ factor attributable to the brand image of the company. The hypothesis is that, the price premium that a company charges for its products depends on certain quality attributes. In this paper, I have estimated the variation in the prices of the different brands of the same cardio-vascular drug due to their perceived brand image that is measured by the number of product lines the company has in the area of cardiovascular medication.