Applying the Bass model to pharmaceuticals in emerging markets

Abstract

Albeit the Bass model was not designed for predicting sales of newly launched drugs, pharmaceutical companies commonly use it for this purpose, mainly because of its good predictive power. Empirical experience, however, mainly refers to mature markets and it is unclear how the model behaves in emerging markets. We try to fill this gap in the literature by comparing the estimation results of the Bass model between emerging markets and mature markets in a big dataset including more than 5,000 new launches from different countries. Our results show a good performance of the model in emerging markets. Compared to mature markets the estimated parameters on average are the same, but there is a higher heterogeneity between individual countries. Our findings favour the application of the Bass model in emerging markets, but also highlight the importance of selecting individual parameters for each country and therapeutic class.