The strategic interaction between firms and formulary committees: Effects on the prices of new drugs
AbstractWe study the strategic interaction between the pricing decisions of a pharmaceutical firm and the reimbursement decisions of a government agency which grants reimbursement rights to patients for whom new drugs are most cost-effective. If the reimbursement decision precedes pricing, the agency only reimburses some patients if the drug's private and public health benefits diverge. This is, there are consumption externalities and the variable cost of the drug exceeds the alternative's. Contrarily, if the firm can commit to a price before reimbursement, a strategic effect implies that by setting a sufficiently high price, the firm can make the agency more willing to reimburse than without commitment.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Health Economics.
Volume (Year): 27 (2008)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/inca/505560
Other versions of this item:
- García-Alonso, M. D. C. & Garcia-Marinoso, B., 2007. "The strategic interaction between firms and formulary committees: effects on the prices of new drugs," Working Papers 07/16, Department of Economics, City University London.
- I10 - Health, Education, and Welfare - - Health - - - General
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
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