Parallel Import and the Pricing of Pharmaceutical Products: Evidence from the European Union
AbstractWe consider policy issues regarding parallel imports (PIs) of brand-name pharmaceuticals in the European Union, where such trade is permitted. We develop a simple model in which an original manufacturer competes in its home market with PI firms. The model suggests that for small trade costs the original manufacturer will accommodate the import decisions of parallel traders and that the price in the home market falls as the volume of parallel imports rises. Using data from Sweden we find that the prices of drugs subject to competition from parallel imports fell relative to other drugs over the period 1994 - 1999. Econometric analysis finds that parallel imports significantly reduced manufacturing prices, by from 12 to 19 percent. There is evidence that this effect increases with multiple PI entrants.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 622.
Length: 36 pages
Date of creation: 17 Feb 2004
Date of revision:
Publication status: Published in Journal of Health Economics, 2004, pages 1035-1057.
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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
Parallel Imports; International Arbitrage; Drug Pricing; Pharmaceutical Products;
Other versions of this item:
- 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.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-06-22 (Accounting & Auditing)
- NEP-ALL-2004-06-22 (All new papers)
- NEP-COM-2004-06-22 (Industrial Competition)
- NEP-HEA-2004-06-22 (Health Economics)
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.:
- Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
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- Ganslandt, Mattias & Maskus, Keith E., 2001.
"Parallel Imports of Pharmaceutical Products in the European Union,"
Working Paper Series
546, Research Institute of Industrial Economics.
- Ganslandt, Mattias & Maskus, Keith E., 2001. "Parallel imports of pharmaceutical products in the European Union," Policy Research Working Paper Series 2630, The World Bank.
- Richard G. Frank & David S. Salkever, 1997. "Generic Entry and the Pricing of Pharmaceuticals," NBER Working Papers 5306, National Bureau of Economic Research, Inc.
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