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External referencing and pharmaceutical price negotiation

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Author Info
Begoña Garcia Mariñoso (CMT - Comisión del Mercado de las Telecomunicaciones - Comisión del Mercado de las Telecomunicaciones)
Izabela Jelovac (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
Pau Olivella (CODE - Center for the study of the Organizations and Decisions in Economics - Universitat Autónoma de Barcelona)

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Abstract

External referencing (ER) imposes a price cap for pharmaceuticals based on prices of identical products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm while a home country (H) can either negotiate independently or implement ER based on the foreign price. We show that country H always prefers ER if (i) it can condition ER on the drug being subsidized in the foreign country and (ii) copayments are higher in H than in F. H’s preference isreinforced when the difference between country copayments is large and/or H’s population is small. External referencing by H always harms F if (ii) holds, but less so if (i) holds.

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Paper provided by HAL in its series Post-Print with number halshs-00303682_v1.

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Date of creation: 2008
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Handle: RePEc:hal:journl:halshs-00303682_v1

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Related research
Keywords: pharmaceuticals ; external referencing ; price negotiation;

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References listed on IDEAS
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.:
  1. 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. [Downloadable!]
  2. 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. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
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  4. Danzon, Patricia M & Chao, Li-Wei, 2000. "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law & Economics, University of Chicago Press, vol. 43(2), pages 311-57, October.
  5. 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. [Downloadable!]
    Other versions:
  6. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July. [Downloadable!] (restricted)
  7. Valérie Paris & Elizabeth Docteur, 2008. "Pharmaceutical Pricing and Reimbursement Policies in Germany," OECD Health Working Papers 39, OECD, Directorate for Employment, Labour and Social Affairs. [Downloadable!]
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