Policy makers and insurers promote the use of generic drugs because they can deliver large savings without sacrificing quality. But these efforts meet resistance from the public, who perceive generic drugs as inferior substitutes for brand name counterparts. Building on literature showing that negative emotions reduce risk-taking, the authors hypothesize that receiving bad medical news (i.e., negative information about one’s health) prompts patients to favor brand name over generic drugs as means to safeguard their health. The evidence exploits low-density lipoprotein cholesterol test results, where a discontinuity from clinical guidelines enables the authors to estimate the causal effect of bad medical news. Using data covering patients’ prescription drug choices across drug classes, the authors find that patients receiving bad medical news become 8% more likely to choose the brand name alternative. The findings are reinforced by a secondary analysis incorporating the similar context of hemoglobin A1c (blood sugar) testing. The authors also find that bad medical news reduces preferences for generics most strongly among drugs of direct clinical relevance for each test, but the effect also manifests among non–clinically relevant drugs.
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