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Parallel Imports and Manufacturer Rebates

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  • Birg, Laura

Abstract

This paper studies the effect of a change in the mandatory manufacturer rebate on wholesale prices for pharmaceuticals on competition by parallel imports. First, it analyzes the effect of a manufacturer rebate on competition by parallel imports in a two-country model. An increase in the manufacturer rebate increases the market share of parallel imports. Second, the paper exploits a policy reform in Germany in 2010, which increased the manufacturer rebate by 10 percentage points. Using a data set with prescription drugs with competition from parallel imports, I estimate the e¤ect of the change in the manufacturer rebate on competition by parallel imports. Estimation results suggest that an increase in the manufacturer rebate has increased the market share of parallel imports and the number of importers.

Suggested Citation

  • Birg, Laura, 2018. "Parallel Imports and Manufacturer Rebates," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181646, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc18:181646
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    References listed on IDEAS

    as
    1. Bennato, Anna Rita & Valletti, Tommaso, 2014. "Pharmaceutical innovation and parallel trade," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 83-92.
    2. Panos Kanavos & Joan Costa-Font, 2005. "Pharmaceutical parallel trade in Europe: stakeholder and competition effects [‘First report (final) to the Committee on International Trade Law of the International Law Association on the subject o," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 20(44), pages 758-798.
    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. Brekke, Kurt Richard & Holmås, Tor Helge & Straume, Odd Rune, 2013. "Margins and market shares: Pharmacy incentives for generic substitution," European Economic Review, Elsevier, vol. 61(C), pages 116-131.
    5. Giuseppe Carone & Christoph Schwierz & Ana Xavier, 2012. "Cost-containment policies in public pharmaceutical spending in the EU," European Economy - Economic Papers 2008 - 2015 461, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    7. Gene M. Grossman & Edwin L.‐C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402, June.
    8. Birg, Laura, 2013. "Pharmaceutical regulation at the wholesale level and parallel trade," University of Göttingen Working Papers in Economics 180, University of Goettingen, Department of Economics.
    9. Birg, Laura, 2013. "Pharmaceutical cost-sharing systems and savings for health care systems from parallel trade," University of Göttingen Working Papers in Economics 179, University of Goettingen, Department of Economics.
    10. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
    11. Birg, Laura, 2019. "Reference pricing and parallel imports: Evidence from Germany," University of Göttingen Working Papers in Economics 362, University of Goettingen, Department of Economics.
    12. Joan Costa-Font, 2016. "Is medicines parallel trade ‘regulatory arbitrage’?," International Journal of Health Economics and Management, Springer, vol. 16(4), pages 321-336, December.
    13. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    parallel imports; manufacturer rebate; pharmaceuticals; regulation;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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