The determinants of pricing in pharmaceuticals: Are U.S. prices really higher than those of Canada?
AbstractThis paper studies price determination in pharmaceutical markets using data for 25 countries, six years and a comprehensive list of products from the MIDAS IMS database. We show that market power and the quality of the product has a significantly positive impact of prices. The nationality of the producer appears to have a small and often insignificant impact on prices, which suggests that countries which regulates prices have relatively little power to do it in a way that advances narrow national interest. We produce a theoretical explanation for this phenomenon based on the fact that low negotiated prices in a country would have a knock-on effect in other markets, and is thus strongly resisted by producers. Another key finding is that the U.S. has prices that are not significantly higher than those of countries with similar income levels. This, together with the former observation on the effect of the nationality of producers casts doubt on the ability of countries to pursue "free-riding" regulation.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1032.
Date of creation: Apr 2007
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Web page: http://www.econ.upf.edu/
Other versions of this item:
- Antonio Cabrales & Sergi Jiménez-Martín, 2007. "The Determinants of Pricing in Pharmaceuticals: Are U.S. prices really higher than those of Canada?," Working Papers 304, Barcelona Graduate School of Economics.
- Sergi Jimenez-Martin & Antonio Cabrales, 2007. "The determinants of pricing in pharmaceuticals : are U.S. prices really higher than those of Canada?," Economics Working Papers we074021, Universidad Carlos III, Departamento de Economía.
- Antonio Cabrales & Sergi Jiménez-Martín, 2007. "The Determinants of Pricing in Pharmaceuticals: Are U.S. Prices Really Higher than Those of Canada?," UFAE and IAE Working Papers, Unitat de Fonaments de l'AnÃ lisi EconÃ²mica (UAB) and Institut d'AnÃ lisi EconÃ²mica (CSIC) 697.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- I10 - Health, Education, and Welfare - - Health - - - General
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-HEA-2007-05-12 (Health Economics)
- NEP-MKT-2007-05-12 (Marketing)
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