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Coordinating on Lower Prices: Pharmaceutical Pricing Under Political Pressure

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Author Info
Sara Fisher Ellison () (Department of Economics, MIT)
Catherine Wolfram () (Haas School of Business, University of California Berkeley)
Abstract

This paper investigates possible effects of political activity on pharmaceutical prices, focusing on the health care reform period. We characterize firms based on their vulnerability to future price regulation and find that the more vulnerable firms were more likely to take various actions to forestall regulation, most notably coordinating on a specific percentage price increase during 1993. Since moderating price increases could have been an effective tool to avert regulation, the coordination we observe is the obvious response of the industry to a classic collective action problem.

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Paper provided by Institute for Advanced Study, School of Social Science in its series Economics Working Papers with number 0048.

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Length: 36 pages
Date of creation: Jul 2004
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Handle: RePEc:ads:wpaper:0048

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  1. Sara Fisher Ellison, 1998. "What Prices Can Tell Us about the Market for Antibiotics," Working papers 98-10, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Ernst R. Berndt & Iain M. Cockburn & Douglas L. Cocks & Arnold M. Epstein & Zvi Griliches, 1998. "Is Price Inflation Different for the Elderly? An Empirical Analysis of Prescription Drugs," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 1. [Downloadable!]
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  3. David P. Baron, 1997. "Integrated Strategy and International Trade Disputes: The Kodak-Fujifilm Case," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(1), pages 291-346, 06. [Downloadable!] (restricted)
  4. Glenn Ellison & Sara Fisher Ellison, 2007. "Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration," NBER Working Papers 13069, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Glazer, Amihai & McMillan, Henry, 1992. "Pricing by the Firm under Regulatory Threat," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 1089-99, August. [Downloadable!] (restricted)
  6. Ellison, Sara Fisher & Mullin, Wallace P, 2001. "Gradual Incorporation of Information: Pharmaceutical Stocks and the Evolution of President Clinton's Health Care Reform," Journal of Law & Economics, University of Chicago Press, vol. 44(1), pages 89-129, April.
  7. Block, Michael Kent & Nold, Frederick Carl, 1981. "The Deterrent Effect of Antitrust Enforcement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 429-45, June. [Downloadable!] (restricted)
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