Parallel Imports, Drag Price Control and Pharmaceutical Innovation
AbstractThis paper examines how parallel importation influences pharmaceutical innovation and the welfare of the economy, when crossnational drug price differentials occur not only because of demand elasticity based factors, but also governmental drug price control based factors. By explicitly considering the governmental drug price control baaed factors, this paper shows that parallel importation may enhance pharmaceutical innovation, when the bargaining power of a foreign government is strong and the price elasticity of demand in the foreign market is small. We also show that the increase in R&D induced by parallel imports may even increase the consumer surplus of a country with high demand elasticities and which could face relatively low drug prices, if parallel imports were not allowed.
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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 26.
Length: 34 pages
Date of creation: Aug 2005
Date of revision: Aug 2005
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Parallel Imports; Pharmaceutical Innovation; Drug Price Control;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
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