IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v22y2015i2p263-275.html
   My bibliography  Save this article

European Union Pharmaceutical Markets: A Case for Differential Pricing?

Author

Listed:
  • Adrian Towse
  • Michele Pistollato
  • Jorge Mestre-Ferrandiz
  • Zeba Khan
  • Satyin Kaura
  • Louis Garrison

Abstract

Differential pricing has been considered extensively for its potential to increase access to medicines in low- and middle-income countries. A differential pricing system applied within an economic union (such as the European Union [EU]) comprising high-income and middle-income countries would also increase access and provide stronger incentives to invest in the R&D of innovative medicines. Access to innovative medicines is limited in EU markets with relatively low GDP per capita, indicating that the current pricing system does not promote efficient access. This article looks at how theory could be put into practice suggesting ways to implement a differential pricing system in the EU that can enhance overall welfare.

Suggested Citation

  • Adrian Towse & Michele Pistollato & Jorge Mestre-Ferrandiz & Zeba Khan & Satyin Kaura & Louis Garrison, 2015. "European Union Pharmaceutical Markets: A Case for Differential Pricing?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(2), pages 263-275, July.
    • Handle: RePEc:taf:ijecbs:v:22:y:2015:i:2:p:263-275
    DOI: 10.1080/13571516.2015.1045747
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13571516.2015.1045747
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13571516.2015.1045747?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November.
    2. Panos Kanavos & Joan Costa-Font, 2005. "Pharmaceutical parallel trade in Europe: stakeholder and competition effects [‘First report (final) to the Committee on International Trade Law of the International Law Association on the subject o," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 20(44), pages 758-798.
    3. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    4. Jena, Anupam B. & Philipson, Tomas J., 2008. "Cost-effectiveness analysis and innovation," Journal of Health Economics, Elsevier, vol. 27(5), pages 1224-1236, September.
    5. Lakdawalla, Darius & Sood, Neeraj, 2013. "Health insurance as a two-part pricing contract," Journal of Public Economics, Elsevier, vol. 102(C), pages 1-12.
    6. Leopold, Christine & Mantel-Teeuwisse, Aukje Katja & Vogler, Sabine & de Joncheere, Kees & Laing, Richard Ogilvie & Leufkens, Hubert G.M., 2013. "Is Europe still heading to a common price level for on-patent medicines? An exploratory study among 15 Western European countries," Health Policy, Elsevier, vol. 112(3), pages 209-216.
    7. William Jack & Jean O. Lanjouw, 2005. "Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute?," The World Bank Economic Review, World Bank, vol. 19(1), pages 45-67.
    8. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    9. Michael Kremer, 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1137-1167.
    10. Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel imports and the pricing of pharmaceutical products: evidence from the European Union," Journal of Health Economics, Elsevier, vol. 23(5), pages 1035-1057, September.
    11. Garber Alan M & Jones Charles I. & Romer Paul, 2006. "Insurance and Incentives for Medical Innovation," Forum for Health Economics & Policy, De Gruyter, vol. 9(2), pages 1-27, March.
    12. Wilson, Robert B, 1989. "Efficient and Competitive Rationing," Econometrica, Econometric Society, vol. 57(1), pages 1-40, January.
    13. Stefan Szymanski & Tommaso Valletti, 2005. "Parallel trade, price discrimination, investment and price caps [‘First report (final) to the Committee on International Trade Law of the International Law Association on the subject of parallel im," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 20(44), pages 706-749.
    14. Patricia Danzon, 1997. "Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(3), pages 301-322.
    15. Fritz von der Schulenburg & Sotiris Vandoros & Panos Kanavos, 2011. "The effects of drug market regulation on pharmaceutical prices in Europe: overview and evidence from the market of ACE inhibitors," Health Economics Review, Springer, vol. 1(1), pages 1-8, December.
    16. Sotiris Vandoros & Panos Kanavos, 2014. "Parallel Trade and Pharmaceutical Prices: A Game-theoretic Approach and Empirical Evidence from the European Union," The World Economy, Wiley Blackwell, vol. 37(6), pages 856-880, June.
    17. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    18. Patricia Danzon, 1997. "Trade and Price Differentials for Pharmaceuticals: Policy Options," Monograph 000430, Office of Health Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Suaad Almajed & Nora Alotaibi & Sana Zulfiqar & Zahraa Dhuhaibawi & Niall O’Rourke & Richard Gaule & Caoimhe Byrne & Aaron M. Barry & Dylan Keeley & James F. O’Mahony, 2022. "Cost-effectiveness evidence on approved cancer drugs in Ireland: the limits of data availability and implications for public accountability," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(3), pages 375-431, April.
    2. Sabine Vogler, 2019. "Fair prices for medicines? Exploring competent authorities’ and public payers’ preferences on pharmaceutical policies," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(3), pages 443-469, August.
    3. Shi, Wunan & Wouters, Olivier J. & Liu, Gordon & Mossialos, Elias & Yang, Xiuyun, 2020. "Association between provincial income levels and drug prices in China over the period 2010–2017," Social Science & Medicine, Elsevier, vol. 263(C).
    4. Giorgio Gnecco & Berna Tuncay & Fabio Pammolli, 2018. "A Comparison of Game-Theoretic Models for Parallel Trade," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-57, September.
    5. Giorgio Gnecco & Fabio Pammolli & Berna Tuncay, 2022. "Welfare and research and development incentive effects of uniform and differential pricing schemes," Computational Management Science, Springer, vol. 19(2), pages 229-268, June.
    6. Sabine Vogler & Kenneth R. Paterson, 2017. "Can Price Transparency Contribute to More Affordable Patient Access to Medicines?," PharmacoEconomics - Open, Springer, vol. 1(3), pages 145-147, September.
    7. Fabio Pammolli & Armando Rungi, 2016. "Access to Medicines and European Market Integration," Working Papers 01/2016, IMT School for Advanced Studies Lucca, revised Jan 2016.
    8. Pedro Garcia-del-Barrio, 2017. "Pareto-improving income redistribution: expanding consumer access to the vaccines market," Economics of Governance, Springer, vol. 18(3), pages 275-313, August.
    9. Riccaboni, Massimo & Swoboda, Torben & Van Dyck, Walter, 2022. "Pharmaceutical net price transparency across european markets: Insights from a multi-agent simulation model," Health Policy, Elsevier, vol. 126(6), pages 534-540.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    2. Patricia Danzon & Adrian Towse & Jorge Mestre‐Ferrandiz, 2015. "Value‐Based Differential Pricing: Efficient Prices for Drugs in a Global Context," Health Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 294-301, March.
    3. Fabio Pammolli & Armando Rungi, 2016. "Access to Medicines and European Market Integration," Working Papers 01/2016, IMT School for Advanced Studies Lucca, revised Jan 2016.
    4. Shi, Wunan & Wouters, Olivier J. & Liu, Gordon & Mossialos, Elias & Yang, Xiuyun, 2020. "Association between provincial income levels and drug prices in China over the period 2010–2017," Social Science & Medicine, Elsevier, vol. 263(C).
    5. Patricia M. Danzon & Andrew W. Mulcahy & Adrian K. Towse, 2015. "Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition, and Procurement," Health Economics, John Wiley & Sons, Ltd., vol. 24(2), pages 238-252, February.
    6. Lakdawalla, Darius & Sood, Neeraj, 2009. "Innovation and the welfare effects of public drug insurance," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 541-548, April.
    7. Panos Kanavos & Sotiris Vandoros, 2010. "Competition in prescription drug markets: is parallel trade the answer?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 325-338.
    8. Hornbeck, Richard A., 2005. "Price Discrimination and Smuggling of AIDS Drugs," Scholarly Articles 11186012, Harvard University Department of Economics.
    9. Bennato, Anna Rita & Valletti, Tommaso, 2014. "Pharmaceutical innovation and parallel trade," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 83-92.
    10. Kyna Fong & Michael Schwarz, 2009. "Towards an Efficient Mechanism for Prescription Drug Procurement," NBER Working Papers 14718, National Bureau of Economic Research, Inc.
    11. Darius Lakdawalla & Neeraj Sood, 2007. "The Welfare Effects of Public Drug Insurance," NBER Working Papers 13501, National Bureau of Economic Research, Inc.
    12. Galasso, Alberto & Mitchell, Matthew & Virag, Gabor, 2018. "A theory of grand innovation prizes," Research Policy, Elsevier, vol. 47(2), pages 343-362.
    13. Eric Budish & Benjamin Roin & Heidi Williams, 2013. "Do fixed patent terms distort innovation? Evidence from cancer clinical trials," Discussion Papers 13-001, Stanford Institute for Economic Policy Research.
    14. David Rietzke & Yu Chen, 2020. "Push or pull? Performance‐pay, incentives, and information," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 301-317, March.
    15. Iain M. Cockburn & Jean O. Lanjouw & Mark Schankerman, 2016. "Patents and the Global Diffusion of New Drugs," American Economic Review, American Economic Association, vol. 106(1), pages 136-164, January.
    16. Yin, Nina, 2023. "Pharmaceuticals, incremental innovation and market exclusivity," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    17. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    18. Gene M. Grossman & Edwin L.‐C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402, June.
    19. Onur Bayar & Thomas J. Chemmanur & Mark H. Liu, "undated". "How to Motivate Fundamental Innovation: Subsidies versus Prizes and the Role of Venture Capital," Working Papers 0175fin, College of Business, University of Texas at San Antonio, revised 06 Jan 2016.
    20. Pedro Pita Barros & Xavier Martínez-Giralt, 2006. "On insurance and the cost-sharing of pharmaceutical R&D," Working Papers 293, Barcelona School of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:22:y:2015:i:2:p:263-275. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.