A dual-market diffusion model for a new prescription pharmaceutical

Despite the proliferation of diffusion models and a plethora of applications in many different markets and domains, relatively little research has been conducted on prescription drug diffusion. Yet prescription pharmaceuticals are an increasingly important component of patient care and a critical factor for health economics. Based on clinical management and pharmacoepidemilogical concepts that consider the severity of health problems, and the medical practice of watchful waiting, we propose a dual-market model for the diffusion of new prescription pharmaceuticals. This model distinguishes between an “early” adoption market involving patients with severe health problems, for whom demand is accumulated prior to the pharmaceutical's launch, and a “late” market corresponding to prescriptions for patients with mild problems, which is developed after and potentially triggered by the product's launch. We applied the model to monthly data on new prescriptions and on corresponding marketing activities for a new prescription category, representing the first oral treatment available for the disease. The results suggest that the proposed model has good parameter face and forecasting validity.