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Generic substitution policy, prices and market structure: evidence from a quasi-experiment in Finland

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  • Aki Kangasharju
  • Joni Hokkanen
  • Ismo Linnosmaa
  • Hannu Valtonen

Abstract

The present paper evaluates the quantitative impact of a pharmaceutical reform on pharmaceutical prices. A generic substitution policy was introduced in Finland in 2003 to contain rising pharmaceutical expenditure. After the reform pharmacists were obliged to propose a cheaper alternative to a prescribed pharmaceutical product whenever a substitutable product was available. There were three possible channels through which the price effect might have been transmitted. First, the policy might have affected manufacturers? pricing behaviour for existing pharmaceutical products. Second, firms might have introduced new product variants of existing drugs to the market in the form of new generics or different package sizes. Third, the policy might have affected prices through the market structure, with more firms offering new product variants entering the market.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 35.

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Date of creation: 24 Aug 2012
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Handle: RePEc:fer:wpaper:35

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Keywords: pharmaceuticals; generic substitution; difference-in-differences; pretreatment trends; therapeutic competition;

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References

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  3. Wolfers, Justin, 2003. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," Research Papers 1819, Stanford University, Graduate School of Business.
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  15. Paul V. Grootendorst & John K. Marshall & Anne M. Holbrook & Lisa R. Dolovich & Bernie J. O'Brien & Adrian R. Levy, 2004. "The Impact of Differential Cost Sharing of Non-Steroidal Anti-Inflammatory Agents on the Use and Costs of Analgesic Drugs," Social and Economic Dimensions of an Aging Population Research Papers 115, McMaster University.
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