Price regulation and generic competition in the pharmaceutical market
AbstractIn March 2003 the Norwegian government implemented yardstick based price regulation schemes on a selection of drugs experiencing generic competition. The retail price cap, termed âindex priceâ, on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998-2004 for the 6 drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.
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Bibliographic InfoArticle provided by Springer in its journal The European Journal of Health Economics.
Volume (Year): 7 (2006)
Issue (Month): 3 (September)
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Web page: http://link.springer.de/link/service/journals/10198/index.htm
Other versions of this item:
- Dalen, Dag Morten & Strøm, Steinar & Haabeth, Tonje, 2005. "Price regulation and generic competition in the pharmaceutical market," Memorandum 33/2005, Oslo University, Department of Economics.
- Dalen, Dag Morten & Habeth, Tonje & Strøm, Steinar, 2009. "Price regulation and generic competition in the pharmaceutical market," HERO On line Working Paper Series 2006:1, Oslo University, Health Economics Research Programme.
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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