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Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?

Author

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  • Granlund, David

    (Department of Economics, Umeå University)

  • Köksal , Miyase Yesim

    (Department of Economics, School of Business, Economics and Law)

Abstract

What has been the effect of competition from parallel imports on prices of locally-sourced on-patent drugs? Did the 2002 Swedish mandatory substitution reform increase this competition? To answer these questions, we carried out difference-in-differences estimation on monthly data for a panel of all on-patent prescription drugs sold in Sweden during the 40 months from January 2001 through April 2004. On average, facing competition from parallel imports caused a 15-17% fall in price. While the reform increased the effect of competition from parallel imports, it was only by 0.9%. The reform, however, did increase the effect of therapeutic competition by 1.6%.

Suggested Citation

  • Granlund, David & Köksal , Miyase Yesim, 2011. "Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?," Umeå Economic Studies 824, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0824
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    References listed on IDEAS

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    1. Lopez-Casasnovas, Guillem & Puig-Junoy, Jaume, 2000. "Review of the literature on reference pricing," Health Policy, Elsevier, vol. 54(2), pages 87-123, November.
    2. Jorge Mestre, 2003. "Reference prices: The Spanish way," Investigaciones Economicas, Fundación SEPI, vol. 27(1), pages 125-149, January.
    3. Nina Pavcnik, 2002. "Do Pharmaceutical Prices Respond to Potential Patient Out-of-Pocket Expenses?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 469-487, Autumn.
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    Cited by:

    1. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    2. Kaiser, Ulrich & Mendez, Susan J. & Rønde, Thomas & Ullrich, Hannes, 2014. "Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark," Journal of Health Economics, Elsevier, vol. 36(C), pages 174-187.
    3. Granlund, David & Yesim Köksal, Miyase, 2012. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," HUI Working Papers 59, HUI Research.
    4. Granlund, David & Yesim Köksal, Miyase, 2011. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," Umeå Economic Studies 831, Umeå University, Department of Economics.
    5. Granlund, David, 2012. "The effect of pharmacies’ right to negotiate discounts on the market share of parallel imported pharmaceuticals," HUI Working Papers 75, HUI Research.

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    More about this item

    Keywords

    parallel imports; pharmaceutical drugs; price competition; reference pricing; therapeutic 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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