Diffusion of New Pharmaceutical Drugs in Developing and Developed Nations

In the context of introducing new products around the world, it is important to understand
the relative attractiveness of various countries in terms of maximum penetration potential
and diffusion speed. In this paper, we examine these market characteristics for a new
category of prescription drugs in both developing and developed countries. Using data from
fifteen countries, and a logistic specification in the Hierarchical Bayesian framework, we
report the differences in diffusion speed and maximum penetration potential between
developing and developed nations. Our methodology accounts for the limited number of data
observations as well as serial correlation and endogeneity problems that arise in the
analysis. The principal findings include: (i) Compared to developed countries, developing
nations tend to have lower diffusion speeds and maximum penetration levels; (ii) Laggard
developed countries have higher speeds. However, laggard developing countries do not have
higher diffusion speeds; (iii) Per capita expenditures on healthcare have a positive effect on
diffusion speed (particularly for developed countries), while higher prices tend to decrease