Price regulation and generic competition in the pharmaceutical market
AbstractIn March 2003 the Norwegian government implemented yardstick based price regulation schemes on a selection of drugs experiencing generic competition. The retail price cap, termed “index price”, on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998-2004 for the 6 drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.
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Bibliographic InfoPaper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number 2006:1.
Length: 28 pages
Date of creation: 04 Jun 2009
Date of revision:
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Postal: HERO / Institute of Health Management and Health Economics P.O. Box 1089 Blindern, N-0317 Oslo, Norway
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Discrete choice; demand for pharmaceuticals; monopolistic competition; evaluation of yardstick based price regulation;
Other versions of this item:
- Dag Dalen & Steinar Strøm & Tonje Haabeth, 2006. "Price regulation and generic competition in the pharmaceutical market," The European Journal of Health Economics, Springer, vol. 7(3), pages 204-211, September.
- Dalen, Dag Morten & Strøm, Steinar & Haabeth, Tonje, 2005. "Price regulation and generic competition in the pharmaceutical market," Memorandum 33/2005, Oslo University, Department of Economics.
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-03 (All new papers)
- NEP-COM-2009-06-03 (Industrial Competition)
- NEP-DCM-2009-06-03 (Discrete Choice Models)
- NEP-HEA-2009-06-03 (Health Economics)
- NEP-MIC-2009-06-03 (Microeconomics)
- NEP-MKT-2009-06-03 (Marketing)
- NEP-REG-2009-06-03 (Regulation)
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