IDEAS home Printed from https://ideas.repec.org/p/zbw/cegedp/279.html
   My bibliography  Save this paper

External reference pricing and the choice of country baskets and pricing rules

Author

Listed:
  • Birg, Laura

Abstract

This paper models different external reference pricing schemes - a price cap based on the drug price in one or two countries and on the minimum or average drug price - in a three-country framework. It studies the choice of external reference pricing schemes in one country as well as its effect on welfare in the other countries, the manufacturer´s export decision, and the incentives for the other countries to also adopt an external reference pricing scheme. Depending on market size in the country adopting external reference pricing and market size difference of the other two countries, welfare is highest under the minimum price-rule or under the average price-rule. External reference pricing increases the drug price and decreases welfare in the other countries. If the market size in the country adopting an external reference pricing scheme is sufficiently large, the manufacturer does not export to the other countries. There is the incentive for the other countries also adopt external reference pricing.

Suggested Citation

  • Birg, Laura, 2016. "External reference pricing and the choice of country baskets and pricing rules," University of Göttingen Working Papers in Economics 279, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:279
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/129097/1/849498864.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Verniers, I.W.J. & Stremersch, S. & Croux, C., 2011. "The Global Entry of New Pharmaceuticals: A Joint Investigation of Launch Window and Price," ERIM Report Series Research in Management ERS-2011-010-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    2. Verniers, Isabel & Stremersch, Stefan & Croux, Christophe, 2011. "The global entry of new pharmaceuticals: A joint investigation of launch window and price," International Journal of Research in Marketing, Elsevier, vol. 28(4), pages 295-308.
    3. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
    4. Anke Richter, 2008. "Assessing the Impact of Global Price Interdependencies," PharmacoEconomics, Springer, vol. 26(8), pages 649-659, August.
    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. Foad Iravani & Hamed Mamani & Emisa Nategh, 2020. "External Reference Pricing and Parallel Imports of Pharmaceuticals: A Policy Comparison," Production and Operations Management, Production and Operations Management Society, vol. 29(12), pages 2716-2735, December.
    2. Nicolas Houy & Izabela Jelovac, 2019. "Comparing approval procedures for new drugs," The World Economy, Wiley Blackwell, vol. 42(5), pages 1598-1619, May.
    3. Gamba, S.; & Pertile, P.; & Righetti, G.;, 2022. "Spillovers of Pharmaceutical Price Regulations: evidence from the AMNOG Reform in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 22/20, HEDG, c/o Department of Economics, University of York.

    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. Verdiana Giannetti & Gaia Rubera, 2020. "Innovation for and from emerging countries: a closer look at the antecedents of trickle-down and reverse innovation," Journal of the Academy of Marketing Science, Springer, vol. 48(5), pages 987-1008, September.
    2. 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.
    3. Nicolas Houy & Izabela Jelovac, 2019. "Comparing approval procedures for new drugs," The World Economy, Wiley Blackwell, vol. 42(5), pages 1598-1619, May.
    4. Sood, Ashish & Kappe, Eelco & Stremersch, Stefan, 2014. "The commercial contribution of clinical studies for pharmaceutical drugs," International Journal of Research in Marketing, Elsevier, vol. 31(1), pages 65-77.
    5. S. Buxton & Kostas Nikolopoulos & M. Khammash & P. Stern, 2015. "Modelling and Forecasting Branded and Generic Pharmaceutical Life Cycles: Assessment of the Number of Dispensed Units," Working Papers 15004, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    6. Nicolas Houy & Izabela Jelovac, 2015. "Drug Launch Timing and International Reference Pricing," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 978-989, August.
    7. Stefan Stremersch & Jorge Gonzalez & Albert Valenti & Julian Villanueva, 2023. "The value of context-specific studies for marketing," Journal of the Academy of Marketing Science, Springer, vol. 51(1), pages 50-65, January.
    8. Laura Birg, 2023. "Pharmaceutical regulation under market integration through parallel trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1322-1346, November.
    9. Nikolopoulos, Konstantinos & Buxton, Samantha & Khammash, Marwan & Stern, Philip, 2016. "Forecasting branded and generic pharmaceuticals," International Journal of Forecasting, Elsevier, vol. 32(2), pages 344-357.
    10. Eric W. Bond & Kamal Saggi, 2023. "Compulsory licensing, price controls, and access to patented foreign products," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 19, pages 437-448, World Scientific Publishing Co. Pte. Ltd..
    11. Tomaso Duso & Annika Herr & Moritz Suppliet, 2014. "The Welfare Impact Of Parallel Imports: A Structural Approach Applied To The German Market For Oral Anti‐Diabetics," Health Economics, John Wiley & Sons, Ltd., vol. 23(9), pages 1036-1057, September.
    12. Ajay Bhaskarabhatla & Priyatam Anurag & Chirantan Chatterjee & Enrico Pennings, 2021. "How Does Regulation Impact Strategic Repositioning by Firms Across Submarkets? Evidence from the Indian Pharmaceutical Industry," Strategy Science, INFORMS, vol. 6(3), pages 209-227, September.
    13. Nebibe Varol & Joan Costa-i-Font & Alistair McGuire, 2011. "Explaining Early Adoption on New Medicines: Regulation, Innovation and Scale," CESifo Working Paper Series 3459, CESifo.
    14. TAKECHI Kazutaka, 2012. "Negative Effects of Intellectual Property Protection: The unusual suspects?," Discussion papers 12057, Research Institute of Economy, Trade and Industry (RIETI).
    15. Ryan, Michael P., 2010. "Patent Incentives, Technology Markets, and Public-Private Bio-Medical Innovation Networks in Brazil," World Development, Elsevier, vol. 38(8), pages 1082-1093, August.
    16. 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.
    17. Pierre Dubois & Morten Sæthre, 2020. "On the Effect of Parallel Trade on Manufacturers' and Retailers' Profits in the Pharmaceutical Sector," Econometrica, Econometric Society, vol. 88(6), pages 2503-2545, November.
    18. Iain M. Cockburn & Jean O. Lanjouw & Mark Schankerman, 2016. "Patents and the Global Diffusion of New Drugs," American Economic Review, American Economic Association, vol. 106(1), pages 136-164, January.
    19. Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011. "External referencing and pharmaceutical price negotiation," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 737-756, June.
    20. 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.

    More about this item

    Keywords

    external reference pricing;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    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:zbw:cegedp:279. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/cdgoede.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.