Parallel imports and the pricing of pharmaceutical products: evidence from the European Union
AbstractWe consider policy issues regarding parallel imports (PIs) of brand-name pharmaceuticals in the European Union, where such trade is permitted. We develop a simple model in which an original manufacturer competes in its home market with PI firms. The model suggests that for small trade costs the original manufacturer will accommodate the import decisions of parallel traders and that the price in the home market falls as the volume of parallel imports rises. Using data from Sweden we find that the prices of drugs subject to competition from parallel imports fell relative to other drugs over the period 1994 - 1999. Econometric analysis finds that parallel imports significantly reduced manufacturing prices, by from 12 to 19 percent. There is evidence that this effect increases with multiple PI entrants.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Health Economics.
Volume (Year): 23 (2004)
Issue (Month): 5 (September)
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Web page: http://www.elsevier.com/locate/inca/505560
Other versions of this item:
- Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel Import and the Pricing of Pharmaceutical Products: Evidence from the European Union," Working Paper Series 622, Research Institute of Industrial Economics.
- 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
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Policy Research Working Paper Series
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