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Reference Pricing Versus Co-Payment in the Pharmaceutical Industry: Firm's Pricing Strategies

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  • Marisa Miraldo

    (Centre for Health Economics, University of York)

Abstract

Within a horizontally differentiation model and allowing for heterogeneous qualities, we analyze the effects of reference pricing reimbursement on firms’ pricing strategies. With this analysis we find inherent incentives for firms’ pricing behaviour, and consequently we shed some light on time consistency of such policy. The analysis encompasses different reference price rules. Results show that if drugs have equal quality, reference pricing may lead to higher prices. With quality differentiation both the minimum and linear policies unambiguously lead to higher prices.

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File URL: http://www.york.ac.uk/media/che/documents/papers/researchpapers/rp27_reference_pricing_versus_co-payment_in_the_pharmaceutical_industry_firms_pricing_strategies.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by Centre for Health Economics, University of York in its series Working Papers with number 027cherp.

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Length: 38 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:chy:respap:27cherp

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  1. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management.
  2. Ching-to Albert Ma, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Papers 0047, Boston University - Industry Studies Programme.
  3. Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
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Cited by:
  1. Birg, Laura, 2013. "Pharmaceutical regulation and health policy objectives," Center for European, Governance and Economic Development Research Discussion Papers 183, University of Goettingen, Department of Economics.
  2. David Bardey & Bruno Jullien & Jean-Marie Lozachmeur, 2013. "Health Insurance and Diversity of Treatment: A Policy Mix Perspective," CESifo Working Paper Series 4111, CESifo Group Munich.

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