Publicação
Price regulation and parallel imports of pharmaceuticals
| Resumo: | This paper studies the effects of price regulation and parallel imports in the on-patent pharmaceutical market. In a theory model where the producer price is subject to bargaining between the brand-name producer and a distributor, we show that the effects of stricter price regulation crucially depend on whether the producer faces competition from parallel imports. While parallel imports improve the bargaining position of the distributor, price regulation counteracts this effect and may even be profitable for the producer. We test the implications of our model on a unique dataset with information on sales and prices at both producer and retail level for 165 substances over 4 years (2004–2007). We show that stricter price regulation reduces competition from parallel imports, and has no (strictly negative) effect on producer profits in the presence (absence) of parallel imports. Our results suggest that price regulation might improve static efficiency without being harmful for dynamic efficiency in the presence of parallel imports. |
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| Autores principais: | Brekke, Kurt R. |
| Outros Autores: | Holmås, Tor Helge; Straume, Odd Rune |
| Assunto: | Pharmaceutical market Price regulation Parallel imports I11 I18 L13 L51 L65 Ciências Sociais::Economia e Gestão |
| Ano: | 2015 |
| País: | Portugal |
| Tipo de documento: | artigo |
| Tipo de acesso: | acesso restrito |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | This paper studies the effects of price regulation and parallel imports in the on-patent pharmaceutical market. In a theory model where the producer price is subject to bargaining between the brand-name producer and a distributor, we show that the effects of stricter price regulation crucially depend on whether the producer faces competition from parallel imports. While parallel imports improve the bargaining position of the distributor, price regulation counteracts this effect and may even be profitable for the producer. We test the implications of our model on a unique dataset with information on sales and prices at both producer and retail level for 165 substances over 4 years (2004–2007). We show that stricter price regulation reduces competition from parallel imports, and has no (strictly negative) effect on producer profits in the presence (absence) of parallel imports. Our results suggest that price regulation might improve static efficiency without being harmful for dynamic efficiency in the presence of parallel imports. |
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