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Externalities of Wholesale Level Regulation under Pharmaceutical Parallel Trade

Author

Listed:
  • Laura Birg

    (Department of Economics, University of Göttingen)

Abstract

This paper studies the effect of pharmaceutical regulation at the wholesale level under parallel trade, i.e. trade outside the manufacturer's authorized distribution channel. In a symmetric equilibrium, both maximum wholesale margins (restriction of pricing by the intermediary) and manufacturer discounts (restriction of the pricing by the manufacturer) decrease the drug price in the respective country. Instruments differ in their effect on the other country: Whereas maximum wholesale margins increase the drug price in the other country, manufacturer discounts may decrease it.

Suggested Citation

  • Laura Birg, 2017. "Externalities of Wholesale Level Regulation under Pharmaceutical Parallel Trade," Economics Bulletin, AccessEcon, vol. 37(3), pages 2260-2273.
    • Handle: RePEc:ebl:ecbull:eb-16-00227
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I3-P202.pdf
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    References listed on IDEAS

    as
    1. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, September.
    2. Yongmin Chen & Keith Maskus, 2005. "Vertical Pricing and Parallel Imports," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(1), pages 1-18.
    3. Gene M. Grossman & Edwin L.‐C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402, June.
    4. 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.
    5. Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, September.
    6. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
    7. 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.
    8. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Laura Birg, 2023. "Parallel imports under a manufacturer rebate and a price freeze: Evidence from Germany," Health Economics, John Wiley & Sons, Ltd., vol. 32(2), pages 302-323, February.

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    More about this item

    Keywords

    parallel trade; pharmaceutical regulation; externalities;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • I1 - Health, Education, and Welfare - - Health

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