External referencing and pharmaceutical price negociation
AbstractExternal referencing (ER) imposes a price cap for pharmaceuticals, based on prices of identical or comparable products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm, whereas a home country (H) can either negotiate prices independently or implement ER, based on the foreign price. We show that country H prefers ER if copayments in H are relatively high. This preference is reinforced when H's population is small. Irrespective of relative country sizes, ER by country H harms country F. Our model is inspired by the wide European experience with this cost-containment policy. Namely, in Europe, drug authorization and price negotiations are carried out by separate agencies. We confirm our main results in two extensions. The first one allows for therapeutic competition between drugs. In the second one, drug authorization and price negotiation take place in a single agency.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5987.
Date of creation: 2011
Date of revision:
Publication status: Published in Health Economics, 2011, Vol. 20, no. 6. pp. 737-756.Length: 19 pages
pharmaceuticals; external referencing; price negotiation;
Other versions of this item:
- Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011. "External referencing and pharmaceutical price negotiation," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 737-756, June.
- Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011. "External referencing and pharmaceutical price negotiation," Post-Print halshs-00303682, HAL.
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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.:
- Antonio Cabrales & Sergi Jiménez-Martín, 2007.
"The Determinants of Pricing in Pharmaceuticals: Are U.S. Prices Really Higher than Those of Canada?,"
UFAE and IAE Working Papers
697.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Antonio Cabrales & Sergi Jiménez-Martín, 2007. "The determinants of pricing in pharmaceuticals: Are U.S. prices really higher than those of Canada?," Economics Working Papers 1032, Department of Economics and Business, Universitat Pompeu Fabra.
- Sergi Jimenez-Martin & Antonio Cabrales, 2007. "The determinants of pricing in pharmaceuticals : are U.S. prices really higher than those of Canada?," Economics Working Papers we074021, Universidad Carlos III, Departamento de Economía.
- Antonio Cabrales & Sergi Jiménez-Martín, 2007. "The Determinants of Pricing in Pharmaceuticals: Are U.S. prices really higher than those of Canada?," Working Papers 304, Barcelona Graduate School of Economics.
- Von der Fehr, N.H.M. & Stevik, K., 1996.
"Persuasive Advertising and Product Differentiation,"
01/1996, Oslo University, Department of Economics.
- Nils-Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, Southern Economic Association, vol. 65(1), pages 113-126, July.
- Jorge Mestre Ferrándiz, 1999. "The impact of generic goods in the pharmaceutical industry," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 599-612.
- Cooper, Thomas E. & Fries, Timothy L., 1991. "The most-favored-nation pricing policy and negotiated prices," International Journal of Industrial Organization, Elsevier, vol. 9(2), pages 209-223, June.
- Danzon, Patricia M & Chao, Li-Wei, 2000. "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 311-57, October.
- Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March.
- Brekke, Kurt R & Königbauer, Ingrid & Straume, Odd Rune, 2005.
"Reference Pricing of Pharmaceuticals,"
Working Papers in Economics
19/05, University of Bergen, Department of Economics.
- Miraldo, Marisa, 2009. "Reference pricing and firms' pricing strategies," Journal of Health Economics, Elsevier, vol. 28(1), pages 176-197, January.
- Merkur, Sherry & Mossialos, Elias, 2007. "A pricing policy towards the sourcing of cheaper drugs in Cyprus," Health Policy, Elsevier, vol. 81(2-3), pages 368-375, May.
- Patricia M. Danzon & Y. Richard Wang & Liang Wang, 2003.
"The Impact of Price Regulation on the Launch Delay of New Drugs - Evidence from Twenty-Five Major Markets in the 1990s,"
NBER Working Papers
9874, National Bureau of Economic Research, Inc.
- Patricia M. Danzon & Y. Richard Wang & Liang Wang, 2005. "The impact of price regulation on the launch delay of new drugs-evidence from twenty-five major markets in the 1990s," Health Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 269-292.
- Robert Marshall & Antonio Merlo, 1996.
220, Federal Reserve Bank of Minneapolis.
- Puig-Junoy, Jaume, 2004. "Incentives and pharmaceutical reimbursement reforms in Spain," Health Policy, Elsevier, vol. 67(2), pages 149-165, February.
- Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
- Anke Richter, 2008. "Assessing the Impact of Global Price Interdependencies," PharmacoEconomics, Springer Healthcare | Adis, vol. 26(8), pages 649-659.
- Alexander Heuer & Malwina Mejer & Jennifer Neuhaus, 2007. "The National Regulation of Pharmaceutical Markets and the Timing of New Drug Launches in Europe," Kiel Advanced Studies Working Papers 437, Kiel Institute for the World Economy.
- Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Care Finance and Economics, Springer, vol. 5(1), pages 5-21, January.
- Tom Stargardt & Jonas Schreyogg, 2006. "Impact of Cross-Reference Pricing on Pharmaceutical Prices: Manufacturers' Pricing Strategies and Price Regulation," Applied Health Economics and Health Policy, Springer Healthcare | Adis, vol. 5(4), pages 235-247.
- Valérie Paris & Elizabeth Docteur, 2008. "Pharmaceutical Pricing and Reimbursement Policies in Germany," OECD Health Working Papers 39, OECD Publishing.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
- Ahmet Ozkardas & Agnieszka Rusinowska, 2013.
"An application of wage bargaining to price negotiation with discount factors varying in time,"
UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers)
- Ahmet Ozkardas & Agnieszka Rusinowska, 2013. "An application of wage bargaining to price negotiation with discount factors varying in time," Documents de travail du Centre d'Economie de la Sorbonne 13066, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Ahmet Ozkardas & Agnieszka Rusinowska, 2014.
"On equilibrium payoffs in wage bargaining with discount rates varying in time,"
UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers)
- Ahmet Ozkardas & Agnieszka Rusinowska, 2014. "On equilibrium payoffs in wage bargaining with discount rates varying in time," Documents de travail du Centre d'Economie de la Sorbonne 14011, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Philipp Ackermann, 2010. "External Price Benchmarking vs. Price Negotiation for Pharmaceuticals," Diskussionsschriften dp1004, Universitaet Bern, Departement Volkswirtschaft.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandre Faure).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.