IDEAS home Printed from https://ideas.repec.org/p/ube/dpvwib/dp1004.html
   My bibliography  Save this paper

External Price Benchmarking vs. Price Negotiation for Pharmaceuticals

Author

Listed:
  • Philipp Ackermann

Abstract

External price benchmarking imposes a price cap for pharmaceuticals based on prices of identical products in other countries. Suppose that a regulatory agency can either directly negotiate drug prices with pharmaceutical manufacturers or implement a benchmarking regime based on foreign prices. Using a model where two countries differ only in their market size, we show that a country prefers benchmarking if its agency has considerably less bargaining power compared to the agency in the other country. Assuming that bargaining power is positively correlated to country size, we find that only small countries might have an incentive to engage in external price benchmarking. This incentive shrinks if population size grows.

Suggested Citation

  • Philipp Ackermann, 2010. "External Price Benchmarking vs. Price Negotiation for Pharmaceuticals," Diskussionsschriften dp1004, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp1004
    as

    Download full text from publisher

    File URL: https://repec.vwiit.ch/dp/dp1004.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011. "External referencing and pharmaceutical price negotiation," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 737-756, June.
    2. Lopez-Casasnovas, Guillem & Puig-Junoy, Jaume, 2000. "Review of the literature on reference pricing," Health Policy, Elsevier, vol. 54(2), pages 87-123, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grepperud, Sverre & Pedersen, Pål Andreas, 2020. "Positioning and negotiations: The case of pharmaceutical pricing," European Journal of Political Economy, Elsevier, vol. 62(C).
    2. Javad Moradpour & Aidan Hollis, 2021. "The economic theory of cost‐effectiveness thresholds in health: Domestic and international implications," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1139-1151, May.
    3. Agnieszka Rusinowska & Ahmet Ozkardas, 2015. "On equilibrium payoffs in wage bargaining with discount rates varying in time," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 181-199, October.
    4. Roger Feldman & Félix Lobo, 2013. "Competition in prescription drug markets: the roles of trademarks, advertising, and generic names," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(4), pages 667-675, August.
    5. Brekke, Kurt R. & Konigbauer, Ingrid & Straume, Odd Rune, 2007. "Reference pricing of pharmaceuticals," Journal of Health Economics, Elsevier, vol. 26(3), pages 613-642, May.
    6. Jesus N. Sarol, Jr., 2014. "Effect of Government Mediated Access Pricing on Prices of Targeted Drugs in The Philippines," Journal of Asian Scientific Research, Asian Economic and Social Society, vol. 4(9), pages 473-489, September.
    7. Jaume Puig, 2003. "Incentives and pharmaceutical reimbursement reforms in Spain," Working Papers, Research Center on Health and Economics 679, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Håkonsen, Helle & Horn, Anne Marie & Toverud, Else-Lydia, 2009. "Price control as a strategy for pharmaceutical cost containment--What has been achieved in Norway in the period 1994-2004?," Health Policy, Elsevier, vol. 90(2-3), pages 277-285, May.
    9. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    10. Brekke, Kurt R. & Holmas, Tor Helge & Straume, Odd Rune, 2011. "Reference pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 95(7), pages 624-638.
    11. Danzon Patricia M. & Ketcham Jonathan D., 2004. "Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand," Forum for Health Economics & Policy, De Gruyter, vol. 7(1), pages 1-56, January.
    12. Heuer, Alexander & Mejer, Malwina & Neuhaus, Jennifer, 2007. "The national regulation of pharmaceutical markets and the timing of new drug launches in Europe," Kiel Advanced Studies Working Papers 437, Kiel Institute for the World Economy (IfW Kiel).
    13. Kaiser, Ulrich & Mendez, Susan J. & Rønde, Thomas & Ullrich, Hannes, 2014. "Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark," Journal of Health Economics, Elsevier, vol. 36(C), pages 174-187.
    14. Paraponaris, A. & Verger, P. & Desquins, B. & Villani, P. & Bouvenot, G. & Rochaix, L. & Gourheux, J. C. & Moatti, J. P. AU -, 2004. "Delivering generics without regulatory incentives?: Empirical evidence from French general practitioners about willingness to prescribe international non-proprietary names," Health Policy, Elsevier, vol. 70(1), pages 23-32, October.
    15. Ivan Moreno-Torres, 2011. "Generic drugs in Spain: price competition vs. moral hazard," Working Papers XREAP2011-04, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2011.
    16. Ghislandi, Simone & Krulichova, Iva & Garattini, Livio, 2005. "Pharmaceutical policy in Italy: towards a structural change?," Health Policy, Elsevier, vol. 72(1), pages 53-63, April.
    17. Li, Sung Ko & He, Xinju, 2019. "The impacts of marketization and subsidies on the treatment quality performance of the Chinese hospitals sector," China Economic Review, Elsevier, vol. 54(C), pages 41-50.
    18. Kanavos, Panos, 2019. "Does external reference pricing deliver what it promises? Evidence on its impact at national level," LSE Research Online Documents on Economics 101522, London School of Economics and Political Science, LSE Library.
    19. Granlund, David & Köksal , Miyase Yesim, 2011. "Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?," Umeå Economic Studies 824, Umeå University, Department of Economics.
    20. Valles, Joan-Antoni & Barreiro, Maica & Cereza, Gloria & Ferro, Juan-Jose & Martinez, Maria-Jose & Escriba, Josep-Maria & Iglesias, Begona & Cucurull, Esther & Barcelo, Estrella AU -, 2003. "A prospective multicenter study of the effect of patient education on acceptability of generic prescribing in general practice," Health Policy, Elsevier, vol. 65(3), pages 269-275, September.

    More about this item

    Keywords

    Pharmaceuticals; price negotiation; administered prices; external reference pricing;
    All these keywords.

    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ube:dpvwib:dp1004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Franz Koelliker (email available below). General contact details of provider: https://edirc.repec.org/data/vwibech.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.