A prescription for knowledge: Patient information and generic substitution

This paper examines the role of information frictions and inattention in the market for health care. We analyze the impact of providing targeted information directly to patients on their choice between brand-name and generic drugs. Using administrative data on 60,000 informational letters sent by a Swiss health insurer, and exploiting the quasi-randomized timing of the dispatch, we find that informing patients of cheaper alternatives leads to an almost fourfold increase in the likelihood of generic substitution. Crucially, this effect does not substantially depend on the patient’s co-payment status. Our results highlight the limits of healthcare policies relying solely on financial incentives when patients lack sufficient information regarding their choices. • Study 60,000 targeted letters informing brand buyers about the existence of generics. • Quasi-random mailing delays identify the causal effect of this information. • Letters quadruple generic substitution relative to a 10% baseline. • Patient information has a large impact on decisions even without financial incentives.