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Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry

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  • Izabela Jelovac

    ()

  • Catalina Bordoy

Abstract

In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients’ level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare. Copyright Springer Science+Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s10754-005-6599-x
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Bibliographic Info

Article provided by Springer in its journal International Journal of Health Care Finance and Economics.

Volume (Year): 5 (2005)
Issue (Month): 1 (January)
Pages: 5-21

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Handle: RePEc:kap:ijhcfe:v:5:y:2005:i:1:p:5-21

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Web page: http://www.springerlink.com/link.asp?id=106603

Related research

Keywords: parallel imports; welfare;

References

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  1. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
  2. repec:fth:iniesr:546 is not listed on IDEAS
  3. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
  4. Jerry A. Hausman & Jeffrey K. MacKie-Mason, 1988. "Price Discrimination and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 253-265, Summer.
  5. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
  6. Ganslandt, Mattias & Maskus, Keith E., 2001. "Parallel imports of pharmaceutical products in the European Union," Policy Research Working Paper Series 2630, The World Bank.
  7. Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, 03.
  8. Patricia M. Danzon, 1998. "The Economics of Parallel Trade," PharmacoEconomics, Springer Healthcare | Adis, vol. 13(3), pages 293-304.
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