Regulation, generic competition and pharmaceutical prices: Theory and evidence from a natural experiment
AbstractWe study the impact of regulatory regimes on generic competition and pharmaceutical pricing using a unique policy experiment in Norway, where reference pricing (RP) replaced price cap regulation in 2003 for a sub-sample of off-patent products. We exploit a detailed panel dataset at product level covering a wide set of off-patent drugs before and after the policy reform. Off-patent drugs not subject to reference pricing serve as our control group. We find that RP leads to lower relative prices, with the effect being driven by strong brand-name price reductions, and not increases in generic prices. We also find that RP increases generic competition, resulting in lower brand-name market shares. Finally, we show that RP has a strong negative effect on average prices at molecule level, suggesting significant cost-savings.
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Bibliographic InfoPaper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 01/2008.
Date of creation: 2008
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Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
- NEP-COM-2008-01-26 (Industrial Competition)
- NEP-IPR-2008-01-26 (Intellectual Property Rights)
- NEP-MIC-2008-01-26 (Microeconomics)
- NEP-MKT-2008-01-26 (Marketing)
- NEP-REG-2008-01-26 (Regulation)
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- Brekke, Kurt Richard & Holmås, Tor Helge & Straume, Odd Rune, 2013.
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