Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition and Procurement
AbstractThis paper analyzes determinants of ex-manufacturer prices for originator and generic drugs across a large sample of countries. We focus on drugs to treat HIV/AIDS, TB and malaria in middle and low income countries (MLICs), with robustness checks to other therapeutic categories and other countries. We examine effects of per capita income, income dispersion, number and type of therapeutic and generic competitors, and whether the drugs are sold to retail pharmacies vs. tendered procurement by NGOs. The cross-national income elasticity of prices is 0.4 across high and low income countries, but is only 0.15 between MLICs, implying that drugs are least affordable relative to income in the lowest income countries. Within-country income inequality contributes to relatively high prices in MLICs. Number of therapeutic and generic competitors only weakly affects prices to retail pharmacies, plausibly because uncertain quality leads to competition on brand rather than price. Tendered procurement attracts multi-national generic suppliers and significantly reduces prices for originators and generics, compared to prices to retail pharmacies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17174.
Date of creation: Jun 2011
Date of revision:
Publication status: published as “Pharmaceutical pricing in emerging markets: Effects of income, competition, and procurement” with Andrew W. Mulcahy and Adrian K. Towse. Health Economics 2013. DOI: 10.1002/hec.3013
Note: HC HE IO
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- O25 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
- NEP-COM-2011-07-13 (Industrial Competition)
- NEP-HEA-2011-07-13 (Health Economics)
- NEP-HME-2011-07-13 (Heterodox Microeconomics)
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.:
- Malueg, David A. & Schwartz, Marius, 1994.
"Parallel imports, demand dispersion, and international price discrimination,"
Journal of International Economics, Elsevier,
Elsevier, vol. 37(3-4), pages 167-195, November.
- Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers, U.S. Department of Justice - Antitrust Division 93-6, U.S. Department of Justice - Antitrust Division.
- Berndt, Ernst R, et al, 1995. "Information, Marketing, and Pricing in the U.S. Antiulcer Drug Market," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 100-105, May.
- Richard G. Frank & David S. Salkever, 1997. "Generic Entry and the Pricing of Pharmaceuticals," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 6(1), pages 75-90, 03.
- Hudson, John, 2000. "Generic take-up in the pharmaceutical market following patent expiry: A multi-country study," International Review of Law and Economics, Elsevier, Elsevier, vol. 20(2), pages 205-221, June.
- Scott Morton, Fiona M., 2000. "Barriers to entry, brand advertising, and generic entry in the US pharmaceutical industry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(7), pages 1085-1104, October.
- Szymanski, Stefan & Valletti, Tommaso, 2005.
"Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis,"
CEPR Discussion Papers, C.E.P.R. Discussion Papers
5022, C.E.P.R. Discussion Papers.
- Tommaso Valletti & Stefan Szymanski, 2006. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEIS Research Paper 75, Tor Vergata University, CEIS.
- Grabowski, Henry G & Vernon, John M, 1992. "Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 35(2), pages 331-50, October.
- Richard G. Frank & David S. Salkever, 1995. "Generic Entry and the Pricing of Pharmaceuticals," NBER Working Papers 5306, National Bureau of Economic Research, Inc.
- Stefan Szymanski & Tommaso Valletti, 2005. "Parallel trade, price discrimination, investment and price caps," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 20(44), pages 705-749, October.
- William Jack & Jean O. Lanjouw, 2003.
"Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute?,"
Working Papers, Center for Global Development
28, Center for Global Development.
- William Jack & Jean O. Lanjouw, 2005. "Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute?," World Bank Economic Review, World Bank Group, World Bank Group, vol. 19(1), pages 45-67.
- Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 421-440, December.
- Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, Elsevier, vol. 19(2), pages 159-195, March.
- Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers, Yale School of Management ysm119, Yale School of Management.
- Patricia M. Danzon & Andrew J. Epstein, 2008. "Effects of Regulation on Drug Launch and Pricing in Interdependent Markets," NBER Working Papers 14041, National Bureau of Economic Research, Inc.
- repec:reg:wpaper:258 is not listed on IDEAS
- Ernst R. Berndt, 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 16(4), pages 45-66, Fall.
- Patricia Danzon, 1997. "Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 4(3), pages 301-322.
- David Reiffen & Michael R. Ward, 2005. "Generic Drug Industry Dynamics," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 37-49, February.
- Tommaso M. Valletti & Stefan Szymanski, 2006. "PARALLEL TRADE, INTERNATIONAL EXHAUSTION AND INTELLECTUAL PROPERTY RIGHTS: A WELFARE ANALYSIS -super-* ," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 54(4), pages 499-526, December.
- Patricia M. Danzon & Adrian K. Towse & Jorge Mestre-Ferrandiz, 2012. "Value-Based Differential Pricing: Efficient Prices for Drugs in a Global Context," NBER Working Papers 18593, National Bureau of Economic Research, Inc.
- Patricia M. Danzon & Michael F. Furukawa, 2011. "Cross-National Evidence on Generic Pharmaceuticals: Pharmacy vs. Physician-Driven Markets," NBER Working Papers 17226, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.