IDEAS home Printed from https://ideas.repec.org/a/bla/popmgt/v28y2019i2p258-275.html
   My bibliography  Save this article

Impact of Parallel Imports on Pricing and Product Launch Decisions in Pharmaceutical Industry

Author

Listed:
  • Mehmet Sekip Altug
  • Ozge Sahin

Abstract

Product launch and pricing decisions in the pharmaceutical industry across different countries are complex. Although introducing a newly developed drug to every country is beneficial to patients worldwide, doing so may have adverse implications for drug developers, such as the emergence of parallel imports. We study a pharmaceutical firm that already introduced a pioneering drug in its home country, where the product is protected by patent rules. The firm decides whether to launch in a second country in the same region, where parallel import between these two countries is feasible and profitable for the parallel importer. We characterize the joint pricing and product launch decision. We show the firm chooses one of three strategies: (i) launch and accommodate parallel import, (ii) launch and deter parallel import, and (iii) not launch. We show that firms are more likely not to launch the drug when the drug price is determined through a negotiation between the firm and the government. We discuss how insurance coverage, market size, quality perception of the parallel imported drug, and valuations affect these strategies. We then study the impact of launch and pricing decisions on social welfare and discuss policy implications for the regulators and potential strategies for the firm to mitigate the negative effects of a parallel import threat. We also study the impact of perfect and imperfect competition among parallel import firms on firm's price and launch decisions. Finally, we discuss the practice of distributing rebates as a post‐launch strategy to manage parallel imports.

Suggested Citation

  • Mehmet Sekip Altug & Ozge Sahin, 2019. "Impact of Parallel Imports on Pricing and Product Launch Decisions in Pharmaceutical Industry," Production and Operations Management, Production and Operations Management Society, vol. 28(2), pages 258-275, February.
  • Handle: RePEc:bla:popmgt:v:28:y:2019:i:2:p:258-275
    DOI: 10.1111/poms.12908
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/poms.12908
    Download Restriction: no

    File URL: https://libkey.io/10.1111/poms.12908?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Iacocca, Kathleen & Mahar, Stephen & Daniel Wright, P., 2022. "Strategic horizontal integration for drug cost reduction in the pharmaceutical supply chain," Omega, Elsevier, vol. 108(C).
    2. Huang, Hongfu & He, Yong & Chen, Jing, 2020. "Cross-market selling channel strategies in an international luxury brand's supply chain with gray markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 144(C).
    3. Wang, Yingjia & Lin, Jiaxin & Choi, Tsan-Ming, 2020. "Gray market and counterfeiting in supply chains: A review of the operations literature and implications to luxury industries," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    4. Abhishek Srivastava & Arqum Mateen & Gopalakrishnan Narayanamurthy & Suman Niranjan & Ashutosh Sarkar, 2024. "Impact of gray markets on strategic channel choice and social welfare," Annals of Operations Research, Springer, vol. 340(2), pages 1035-1062, September.
    5. Rajesh Bagchi & Sung H. Ham & Chuan He, 2020. "Strategic Implications of Confirmation Bias‐Inducing Advertising," Production and Operations Management, Production and Operations Management Society, vol. 29(6), pages 1573-1596, June.
    6. Zhang, Yong & Zhang, Sheng Hao & Feng, Haofang, 2021. "The impacts of money-back guarantees in the presence of parallel importation," European Journal of Operational Research, Elsevier, vol. 295(1), pages 170-182.
    7. Misra, Akansha & Saranga, Haritha & Tripathi, Rajeev R, 2022. "Channel choice and incentives in the cadaveric organ supply chain," European Journal of Operational Research, Elsevier, vol. 302(3), pages 1202-1214.
    8. Li, Hai & Qing, Qiankai & Wang, Juan & Hong, Xianpei, 2021. "An analysis of technology licensing and parallel importation under different market structures," European Journal of Operational Research, Elsevier, vol. 289(1), pages 132-143.
    9. Chunming Xu & Debao Zhu, 2021. "On Conflicts between Pharmaceutical Patent Protection and the Right to Life and Health Based on a Stackelberg Game," IJERPH, MDPI, vol. 18(3), pages 1-13, January.

    More about this item

    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:bla:popmgt:v:28:y:2019:i:2:p:258-275. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1937-5956 .

    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.