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Parallel imports and a mandatory substitution reform: a kick or a muff for price competition in pharmaceuticals?

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  • David Granlund
  • Miyase Koksal-Ayhan

Abstract

What has been the effect of competition from parallel imports on prices of locally sourced on-patent drugs? Did the 2002 Swedish mandatory substitution reform increase this competition? To answer these questions, we carried out difference-in-differences estimation on monthly data for a panel of all locally sourced on-patent prescription drugs sold in Sweden during the 40 months from January 2001 to April 2004. On average, facing competition from parallel imports caused a 15–17 % fall in price. While the reform increased the effect of competition from parallel imports, it was only by 0.9 %. The reform, however, did increase the effect of therapeutic competition by 1.6 %. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • David Granlund & Miyase Koksal-Ayhan, 2015. "Parallel imports and a mandatory substitution reform: a kick or a muff for price competition in pharmaceuticals?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(9), pages 969-983, December.
    • Handle: RePEc:spr:eujhec:v:16:y:2015:i:9:p:969-983
    DOI: 10.1007/s10198-014-0646-9
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    References listed on IDEAS

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    Cited by:

    1. Granlund David & Köksal-Ayhan Miyase Yesim, 2016. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals: Has the Price Competition increased?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1069-1092, April.
    2. David Granlund, 2022. "The Price Effects of Competition from Parallel Imports and Therapeutic Alternatives: Using Dynamic Models to Estimate the Causal Effect on the Extensive and Intensive Margins," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(1), pages 63-92, February.
    3. 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.

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    More about this item

    Keywords

    Parallel imports; Pharmaceutical drugs; Price competition; Reference pricing; Therapeutic competition; I11; L51; L65;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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