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Pricing and Welfare of Parallel Imports in the Pharmaceutical Industry

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Author Info

  • Bordoy,Catalina
  • Jelovac,Izabela

    (MERIT)

Abstract

In this paper we investigate the implications of permitting parallel imports ofpharmaceuticals produced by a monopoly, from one country to another. We use a modelwhere countries differ in the patients’ level of co-payment for buying pharmaceuticals, andpatients differ in the utility obtained from the consumption of pharmaceuticals. We show thatthe effects of parallel imports on total welfare are as follows: On the one hand, whencountries differ in their health system only, parallel imports decrease total welfare; On theother hand, when countries differ in the health needs of their patients only, parallel importsenhance total welfare.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 004.

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Date of creation: 2003
Date of revision:
Handle: RePEc:unm:umamer:2003004

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Related research

Keywords: international economics and trade ;

References

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  1. Patricia M. Danzon, 1998. "The Economics of Parallel Trade," PharmacoEconomics, Springer Healthcare | Adis, vol. 13(3), pages 293-304.
  2. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
  3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  4. Ganslandt, Mattias & Maskus, Keith E., 2001. "Parallel Imports of Pharmaceutical Products in the European Union," Working Paper Series 546, Research Institute of Industrial Economics.
  5. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
  6. repec:fth:iniesr:546 is not listed on IDEAS
  7. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
  8. Nina Pavcnik, 2002. "Do Pharmaceutical Prices Respond to Potential Patient Out-of-Pocket Expenses?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 469-487, Autumn.
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Cited by:
  1. Panos Kanavos & Sotiris Vandoros, 2010. "Competition in prescription drug markets: is parallel trade the answer?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 325-338.

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