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On insurance and the cost-sharing of pharmaceutical R&D

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  • Pedro Pita Barros
  • Xavier Martinez-Giralt

Abstract

Ramsey pricing has been proposed in the pharmaceutical industry as a principle to price discriminate among markets while allowing to recover the (fixed) R&D cost. However, such analyses neglect the presence of insurance or the fund raising costs for drug reimbursement. By incorporating these new elements, we aim at providing some building blocks towards an economic theory merging Ramsey pricing, equity concerns by governments and the strategic incentives, as governments also determine the reimbursement level in countries with a NHS-like system. This will have important implications to the application of Ramsey pricing principles to pharmaceutical products across countries.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 293.

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Date of creation: Sep 2006
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Handle: RePEc:bge:wpaper:293

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Keywords: Ramsey pricing; coinsurance.;

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  1. repec:reg:wpaper:258 is not listed on IDEAS
  2. Frank, Richard G., 2003. "New estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 325-330, March.
  3. Besley, Timothy J., 1988. "Optimal reimbursement health insurance and the theory of Ramsey taxation," Journal of Health Economics, Elsevier, vol. 7(4), pages 321-336, December.
  4. Beatriz Domínguez & Juan José Ganuza & Gerard Llobet, 2005. "R&D in the pharmaceutical industry: A world of small innovations," Economics Working Papers 936, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Sam Allgood & Arthur Snow, 2006. "Marginal Welfare Costs of Taxation with Human and Physical Capital," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 451-464, July.
  6. Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March.
  7. 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.
  8. 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.
  9. Stefan Felder, 2006. "Third-Degree Price Discrimination in the Presence of Subsidies," German Economic Review, Verein für Socialpolitik, vol. 7, pages 419-426, November.
  10. William Jack & Jean O. Lanjouw, 2003. "Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute?," Working Papers 28, Center for Global Development.
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