IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/16261.html
   My bibliography  Save this paper

Has the European Union Achieved a Single Pharmaceutical Market?

Author

Listed:
  • Aysegul Timur
  • Gabriel Picone
  • Jeffrey S. DeSimone

Abstract

This paper explores price differences in the European Union (EU) pharmaceutical market, the EU's fifth largest industry. With the aim of enhancing quality of life along with industry competitiveness and R&D capability, many EU directives have been adopted to achieve a single EU-wide pharmaceutical market. Using annual 1994-2003 data on prices of molecules that treat cardiovascular disease, we examine whether drug price dispersion has indeed decreased across five EU countries. Hedonic regressions show that over time, cross-country price differences between Germany and three of the four other EU sample countries, France, Italy and Spain, have declined, with relative prices in all three as well as the fourth country, UK, rising during the period. We interpret this as evidence that the EU has come closer to achieving a single pharmaceutical market in response to increasing European Commission coordination efforts.

Suggested Citation

  • Aysegul Timur & Gabriel Picone & Jeffrey S. DeSimone, 2010. "Has the European Union Achieved a Single Pharmaceutical Market?," NBER Working Papers 16261, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16261
    Note: EH
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w16261.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    2. Kravis, Irving B & Lipsey, Robert E, 1969. "International Price Comparisons by Regression Methods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(2), pages 233-246, June.
    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.
    4. Judith K. Hellerstein, 1998. "The Importance of the Physician in the Generic Versus Trade-Name Prescription Decision," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 108-136, Spring.
    5. Brekke, Kurt R. & Konigbauer, Ingrid & Straume, Odd Rune, 2007. "Reference pricing of pharmaceuticals," Journal of Health Economics, Elsevier, vol. 26(3), pages 613-642, May.
    6. Sara Ellison Fisher & Iain Cockburn & Zvi Griliches & Jerry Hausman, 1997. "Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 426-446, Autumn.
    7. Michael Dickson & Stephane Jacobzone, 2003. "Pharmaceutical Use and Expenditure for Cardiovascular Disease and Stroke: A Study of 12 OECD Countries," OECD Health Working Papers 1, OECD Publishing.
    8. Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March.
    9. Berndt, Ernst R., 2000. "International comparisons of pharmaceutical prices: what do we know, and what does it mean?," Journal of Health Economics, Elsevier, vol. 19(2), pages 283-287, March.
    10. Boris Augurzky & Silja Göhlmann & Stefan Greß & Jürgen Wasem, 2009. "Effects of the German reference drug program on ex‐factory prices of prescription drugs: a panel data approach," Health Economics, John Wiley & Sons, Ltd., vol. 18(4), pages 421-436, April.
    11. F. M. Scherer, 1993. "Pricing, Profits, and Technological Progress in the Pharmaceutical Industry," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 97-115, Summer.
    12. Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel imports and the pricing of pharmaceutical products: evidence from the European Union," Journal of Health Economics, Elsevier, vol. 23(5), pages 1035-1057, September.
    13. Pinelopi Koujianou Goldberg & Frank Verboven, 2004. "Cross-country price dispersion in the euro era: a case study of the European car market [‘The Law of One Price in Scandinavian duty-free stores’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(40), pages 484-521.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Birg, Laura, 2019. "Price Caps versus Reimbursement Limits: Pharmaceutical Regulation under Market Integration through Parallel Trade," University of Göttingen Working Papers in Economics 253, University of Goettingen, Department of Economics, revised 2019.
    2. Laura Birg, 2015. "Externalities of National Pharmaceutical Policy when Markets are Integrated through Parallel Trade," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 558-574, August.
    3. Di Vita Giuseppe, 2015. "Centralization versus Decentralization of Legislative Production and the Effect on Litigation: A Case Study," Review of Law & Economics, De Gruyter, vol. 11(2), pages 267-291, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Herr, A. & Suppliet, M., 2011. "Co-Payment Exemptions and Reference Prices: an Empirical Study of Pharmaceutical Prices in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 11/18, HEDG, c/o Department of Economics, University of York.
    2. Suppliet, Moritz & Herr, Annika, 2016. "Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets," Discussion Paper 2016-040, Tilburg University, Center for Economic Research.
    3. Brekke, Kurt R. & Holmas, Tor Helge & Straume, Odd Rune, 2011. "Reference pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 95(7), pages 624-638.
    4. 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.
    5. 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.
    6. Susan J. Méndez, 2018. "Parallel trade of pharmaceuticals: The Danish market for statins," Health Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 333-356, February.
    7. Brekke, Kurt R. & Konigbauer, Ingrid & Straume, Odd Rune, 2007. "Reference pricing of pharmaceuticals," Journal of Health Economics, Elsevier, vol. 26(3), pages 613-642, May.
    8. Carine Franc & Laurent Granier & Sébastien Trinquard, 2013. "Tarif forfaitaire de responsabilité : quels impacts sur le pharmacien ?," Working Papers halshs-00800457, HAL.
    9. Granlund, David & Yesim Köksal, Miyase, 2011. "Parallel Imports and Mandatory Substitution Reform: A kick or a muff for price competition in pharmaceuticals," Working Papers in Economics 496, University of Gothenburg, Department of Economics.
    10. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    11. Wright, Donald J., 2004. "The drug bargaining game: pharmaceutical regulation in Australia," Journal of Health Economics, Elsevier, vol. 23(4), pages 785-813, July.
    12. Brekke, Kurt R. & Grasdal, Astrid L. & Holms, Tor Helge, 2009. "Regulation and pricing of pharmaceuticals: Reference pricing or price cap regulation?," European Economic Review, Elsevier, vol. 53(2), pages 170-185, February.
    13. Donald J Wright, 2002. "The drug bargaining game: Pharmaceutical regulation in Australia, CHERE Discussion Paper No 51," Discussion Papers 51, CHERE, University of Technology, Sydney.
    14. Anna Merino, 2000. "The impact of the reference price system on the pharmaceutical market: A theoretical approach," Working Papers, Research Center on Health and Economics 524, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2003.
    15. Eduardo Costa & Carolina Santos, 2022. "Pharmaceutical pricing dynamics in an internal reference pricing system: evidence from changing drugs’ reimbursements," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(9), pages 1497-1518, December.
    16. Herr, Annika & Stühmeier, Torben & Wenzel, Tobias, 2014. "Reference pricing and cost-sharing: Theory and evidence on German off-patent drugs," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100556, Verein für Socialpolitik / German Economic Association.
    17. Liu, Ya-Ming & Yang, Yea-Huei Kao & Hsieh, Chee-Ruey, 2012. "Regulation and competition in the Taiwanese pharmaceutical market under national health insurance," Journal of Health Economics, Elsevier, vol. 31(3), pages 471-483.
    18. Regan, Tracy L., 2008. "Generic entry, price competition, and market segmentation in the prescription drug market," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 930-948, July.
    19. Matteo Galizzi & Simone Ghislandi & Marisa Miraldo, 2011. "Effects of Reference Pricing in Pharmaceutical Markets," PharmacoEconomics, Springer, vol. 29(1), pages 17-33, January.
    20. Izhak, Olena, 2019. "Extra costs of integrity: Pharmacy markups and generic substitution in Finland," DICE Discussion Papers 307, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16261. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.