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Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?

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Author Info

  • Granlund, David

    (The Swedish Retail Institute (HUI))

  • Köksal, Miyase Yesim

    (University of Gothenburg)

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    Abstract

    What has been the effect of competition from parallel imports on prices of locally-sourced onpatent drugs? Did the 2002 Swedish mandatory substitution reform increase this competition? To answer these questions, we carried out difference-in-differences estimation on monthly data for a panel of all on-patent prescription drugs sold in Sweden during the 40 months from January 2001 through April 2004. On average, facing competition from parallel imports caused a 15-17% fall in price. While the reform increased the effect of competition from parallel imports, it was only by 0.9%. The reform, however, did increase the effect of therapeutic competition by 1.6%.

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    Bibliographic Info

    Paper provided by HUI Research in its series HUI Working Papers with number 49.

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    Length: 32 pages
    Date of creation: 01 Apr 2011
    Date of revision:
    Handle: RePEc:hhs:huiwps:0049

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    Postal: HUI Research, Regeringsgatan 60, 103 29 Stockholm, Sweden
    Phone: +46 (0)8 762 72 80
    Fax: +46 (0)8 679 76 06
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    Web page: http://www.hui.se/
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    Related research

    Keywords: parallel imports; pharmaceutical drugs; price competition; reference pricing; therapeutic competition;

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    References

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    1. Granlund, David & Rudholm, Niklas, 2008. "Consumer Loyalty in the Swedish Pharmaceuticals Market," HUI Working Papers 17, HUI Research.
    2. Mark E Schaffer, 2005. "XTIVREG2: Stata module to perform extended IV/2SLS, GMM and AC/HAC, LIML and k-class regression for panel data models," Statistical Software Components S456501, Boston College Department of Economics, revised 24 Jul 2012.
    3. 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.
    4. Thomas Aronsson & Mats Bergman & Niklas Rudholm, 2001. "The Impact of Generic Drug Competition on Brand Name Market Shares – Evidence from Micro Data," Review of Industrial Organization, Springer, vol. 19(4), pages 423-433, December.
    5. Jorge Mestre, 2003. "Reference prices: The Spanish way," Investigaciones Economicas, Fundación SEPI, vol. 27(1), pages 125-149, January.
    6. Miraldo, Marisa, 2009. "Reference pricing and firms' pricing strategies," Journal of Health Economics, Elsevier, vol. 28(1), pages 176-197, January.
    7. Kurt R. Brekke & Ingrid Königbauer & Odd Rune Straume, 2006. "Reference Pricing of Pharmaceuticals," CESifo Working Paper Series 1825, CESifo Group Munich.
    8. Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, 09.
    9. Granlund, David, 2009. "Are private physicians more likely to veto generic substitution of prescribed pharmaceuticals?," Social Science & Medicine, Elsevier, vol. 69(11), pages 1643-1650, December.
    10. Lopez-Casasnovas, Guillem & Puig-Junoy, Jaume, 2000. "Review of the literature on reference pricing," Health Policy, Elsevier, vol. 54(2), pages 87-123, November.
    11. Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel imports and the pricing of pharmaceutical products: evidence from the European Union," Journal of Health Economics, Elsevier, vol. 23(5), pages 1035-1057, September.
    12. J. Lundkvist, 2002. "Pricing and reimbursement of drugs in Sweden," The European Journal of Health Economics, Springer, vol. 3(1), pages 66-70, March.
    13. Granlund, David, 2010. "Price and welfare effects of a pharmaceutical substitution reform," Journal of Health Economics, Elsevier, vol. 29(6), pages 856-865, December.
    14. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
    15. Margaret K. Kyle, 2007. "Strategic Responses to Parallel Trade," NBER Working Papers 12968, National Bureau of Economic Research, Inc.
    16. Panos Kanavos & Joan Costa-Font, 2005. "Pharmaceutical parallel trade in Europe: stakeholder and competition effects," Economic Policy, CEPR & CES & MSH, vol. 20(44), pages 751-798, October.
    17. Brekke, Kurt R. & Grasdal, Astrid L. & Holmås, Tor Helge, 2006. "Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?," Working Papers in Economics 14/06, University of Bergen, Department of Economics.
    18. Anders Anell & Ulf Persson, 2005. "Reimbursement and clinical guidance for pharmaceuticals in Sweden," The European Journal of Health Economics, Springer, vol. 6(3), pages 274-279, September.
    19. Granlund, David & Rudholm, Niklas, 2008. "Consumer Loyalty in the Swedish Pharmaceuticals Market," UmeÃ¥ Economic Studies 742, Umeå University, Department of Economics, revised 21 Feb 2012.
    20. David Granlund & Niklas Rudholm, 2011. "Consumer Information and Pharmaceutical Prices: Theory and Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(2), pages 230-254, 04.
    21. Yongmin Chen & Keith Maskus, 2005. "Vertical Pricing and Parallel Imports," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(1), pages 1-18.
    22. Mats A. Bergman & Niklas Rudholm, 2003. "The Relative Importance of Actual and Potential Competition: Empirical Evidence From the Pharmaceuticals Market," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 455-467, December.
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    Citations

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    Cited by:
    1. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2014. "Price Regulation and Parallel Imports of Pharmaceuticals," Discussion Paper Series in Economics 1/2014, Department of Economics, Norwegian School of Economics.
    2. Granlund, David & Yesim Köksal, Miyase, 2012. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," HUI Working Papers 59, HUI Research.
    3. Granlund, David & Yesim Köksal, Miyase, 2011. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," UmeÃ¥ Economic Studies 831, Umeå University, Department of Economics.

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