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Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark

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Author Info

  • Ulrich Kaiser

    (University of Zurich)

  • Susan J. Mendez

    (University of Zurich)

  • Thomas Rønde

    (Copenhagen Business School)

Abstract

On April 1, 2005, Denmark changed the way references prices, a main determinant of reimbursements for pharmaceutical purchases, are calculated. The previous reference prices, which were based on average EU prices, were substituted to minimum domestic prices. Novel to the literature, we estimate the joint effects of this reform on prices and quantities. Prices decreased more than 26 percent due to the reform, which reduced patient and government expenditures by 3.0 percent and 5.6 percent, respectively, and producer revenues by 5.0 percent. The prices of expensive products decreased more than their cheaper counterparts, resulting in large differences in patient benefits from the reform.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2010-01.

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Length: 31 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:kud:kuieci:2010-01

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Keywords: pharmaceutical markets; regulation; co-payments; reference pricing; asymmetric welfare effects;

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References

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Cited by:
  1. Ivan Moreno-Torres, 2011. "Generic drugs in Spain: price competition vs. moral hazard," Working Papers XREAP2011-04, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2011.
  2. Ivan Moreno-Torres, 2011. "What if there was a stronger pharmaceutical price competition in Spain? When regulation has a similar effect to collusion," Working Papers XREAP2011-02, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2011.
  3. Brekke, Kurt R. & Holmas, Tor Helge & Straume, Odd Rune, 2011. "Reference pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 95(7), pages 624-638.
  4. Tomaso Duso & Annika Herr & Moritz Suppliet, 2014. "The Welfare Impact of Parallel Imports: A Structural Approach Applied to the German Market for Oral Anti-diabetics," Discussion Papers of DIW Berlin 1373, DIW Berlin, German Institute for Economic Research.
  5. Herr, A.; & Suppliet, M.;, 2011. "Co-Payment Exemptions and Reference Prices: an Empirical Study of Pharmaceutical Prices in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 11/18, HEDG, c/o Department of Economics, University of York.
  6. Koenig, Pamina & MacGarvie, Megan, 2011. "Regulatory policy and the location of bio-pharmaceutical foreign direct investment in Europe," Journal of Health Economics, Elsevier, vol. 30(5), pages 950-965.

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