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A primer on the economics of re-importation of prescription drugs

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Author Info
Ernst R. Berndt
Abstract

Using the basic tools of intermediate microeconomic theory (such as taught at the level of undergraduate or first-year MBA courses), in this primer I present a framework that helps the reader gain an understanding of economic issues underlying the current political economy debates concerning the impacts on consumers (both US and ex-US) and on prescription pharmaceutical manufacturers of moving to a world with more uniform pricing across countries than is currently the case. The impact on global revenues and profitability of moving from differential to uniform global pricing is relatively modest if confined to the North American (US and Canadian) market, with only Canadians bearing the brunt of higher prices, a most unlikely political economy outcome. The impacts on global revenues and profitability from global uniform prices become considerably larger, however, when one incorporates the much larger entire ex-US market, including not only Canada, but also Europe, Asia and other countries. I conclude with some observations on likely longer term outcomes. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1348
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 4-5 ()
Pages: 415-435
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:28:y:2007:i:4-5:p:415-435

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Joseph Golec & Shantaram Hegde & John A. Vernon, 2005. "Pharmaceutical Stock Price Reactions to Price Constraint Threats and Firm-Level R&D Spending," NBER Working Papers 11229, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Goldberg, Pinelopi Koujianou & Verboven, Frank, 2001. "The Evolution of Price Dispersion in the European Car Market," Review of Economic Studies, Blackwell Publishing, vol. 68(4), pages 811-48, October.
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  3. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," Levine's Working Paper Archive 228400000000000002, David K. Levine. [Downloadable!]
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  4. Manning, Richard L, 1997. "Products Liability and Prescription Drug Prices in Canada and the United States," Journal of Law & Economics, University of Chicago Press, vol. 40(1), pages 203-43, April.
  5. Amy Finkelstein, 2004. "Static and Dynamic Effects of Health Policy: Evidence From the Vaccine Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 527-564, May. [Downloadable!] (restricted)
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