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EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals: Has the Price Competition increased?

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  • Granlund David

    (Department of Economics, Umeå University, SE-901 87 Umeå, Sweden)

  • Köksal-Ayhan Miyase Yesim

    (Department of Economics, School of Business, Economics and Law, University of Gothenburg, SE-405 30 Gothenburg, Sweden)

Abstract

Given the cost of trade and availability of pharmaceuticals, the driving force for parallel trade is the price difference between the source (exporting) and the destination (importing) country. An increase in the price difference or in the availability of pharmaceuticals for parallel trade should increase price competition in the destination country. Using 2003–2007 data from Sweden we investigated whether EU enlargement in 2004, when new countries with low pharmaceutical prices joined the EU, increased competition from parallel imports. Drugs facing competition from parallel imports are found to have on average 19–22% lower prices than they would have had if they had never faced such competition. The EU enlargement is, however, not found to have increased this effect, which might be explained by derogations and changes in consumer perceptions of parallel imports.

Suggested Citation

  • Granlund David & Köksal-Ayhan Miyase Yesim, 2016. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals: Has the Price Competition increased?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1069-1092, April.
    • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:2:p:1069-1092:n:15
    DOI: 10.1515/bejeap-2015-0127
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    References listed on IDEAS

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    1. Tomaso Duso & Annika Herr & Moritz Suppliet, 2014. "The Welfare Impact Of Parallel Imports: A Structural Approach Applied To The German Market For Oral Anti‐Diabetics," Health Economics, John Wiley & Sons, Ltd., vol. 23(9), pages 1036-1057, September.
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    6. David Granlund & Miyase Koksal-Ayhan, 2015. "Parallel imports and a mandatory substitution reform: a kick or a muff for price competition in pharmaceuticals?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(9), pages 969-983, December.
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    More about this item

    Keywords

    EU enlargement; parallel trade; pharmaceuticals; price competition;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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