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The Effects of Price Regulation on Pharmaceutical Expenditure and Availability

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  • Kortelainen, Mika
  • Markkanen, Jaakko
  • Siikanen, Markku
  • Toivanen, Otto

Abstract

Quasi-experimental evidence on the effectiveness of price regulation policies in curbing pharmaceutical expenditure is scarce. We analyze widely utilized generic substitution and reference price policies using data from the Nordic countries. Constructing treatment and control groups by matching data across countries by active ingredients and employing difference-in-difference methods on market-level observations, we find that expenditure per dose decreases by 40% moving from the laxest to the strictest regime. Prices decrease less: Reallocation of demand to cheaper products likely explains the difference. We find no adverse effects on pharmaceutical availability and non-existent or positive quantity effects.

Suggested Citation

  • Kortelainen, Mika & Markkanen, Jaakko & Siikanen, Markku & Toivanen, Otto, 2023. "The Effects of Price Regulation on Pharmaceutical Expenditure and Availability," Working Papers 157, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:157
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    References listed on IDEAS

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    More about this item

    Keywords

    pharmaceutical expenditure; pharmaceutical pricing; generic competition; reference pricing; regulation; Local public finance and provision of public services; I11; I18; H51; L51; L65; C23; fi=Elinkeinopolitiikka|sv=Näringspolitik|en=Industrial and economic policy|; fi=Terveyspalvelut|sv=Hälsovårdstjänster|en=Healthcare services|;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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