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Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry

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  • Izabela Jelovac
  • Catalina Bordoy

Abstract

In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients’ level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 5-21, January.
    • Handle: RePEc:kap:ijhcfe:v:5:y:2005:i:1:p:5-21
    DOI: 10.1007/s10754-005-6599-x
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    1. Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November.
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    Keywords

    parallel imports; welfare;

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