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Reference Pricing Versus Co-Payment in the Pharmaceutical Industry: Firm's Pricing Strategies

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  • Marisa Miraldo

    (Centre for Health Economics, University of York)

Abstract

Within a horizontally differentiation model and allowing for heterogeneous qualities, we analyze the effects of reference pricing reimbursement on firms’ pricing strategies. With this analysis we find inherent incentives for firms’ pricing behaviour, and consequently we shed some light on time consistency of such policy. The analysis encompasses different reference price rules. Results show that if drugs have equal quality, reference pricing may lead to higher prices. With quality differentiation both the minimum and linear policies unambiguously lead to higher prices.

Suggested Citation

  • Marisa Miraldo, 2007. "Reference Pricing Versus Co-Payment in the Pharmaceutical Industry: Firm's Pricing Strategies," Working Papers 027cherp, Centre for Health Economics, University of York.
    • Handle: RePEc:chy:respap:27cherp
    as

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    References listed on IDEAS

    as
    1. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 421-440, Autumn.
    2. Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
    3. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management.
    4. Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
    5. repec:bla:jemstr:v:3:y:1994:i:1:p:93-112:a is not listed on IDEAS
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    Cited by:

    1. David Bardey & Bruno Jullien & Jean-Marie Lozachmeur, 2013. "Health insurance and diversity of treatment: a policy mix perspective," Documentos CEDE 10549, Universidad de los Andes, Facultad de Economía, CEDE.
    2. Birg, Laura, 2013. "Pharmaceutical regulation and health policy objectives," University of Göttingen Working Papers in Economics 183, University of Goettingen, Department of Economics.

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