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A model of parallel imports of pharmaceuticals with endogenous price controls

  • Katherine Sauer


    (University of Southern Indiana)

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    A model is developed to explore the behavior of an original manufacturer with a patent in response to a policy that permits parallel import competition from a country with price controls on the patented good. The model suggests that a manufacturer will limit its supply to the PI-exporting market. The home price is lower only under certain conditions. The relative size of the home market to the potential volume of PIs is a key determinant of the manufacturer's decision to accommodate competition or deter it. Whether the firm accommodates or deters competition, profits fall.

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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 6 (2008)
    Issue (Month): 36 ()
    Pages: 1-8

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    Handle: RePEc:ebl:ecbull:eb-08f10024
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    1. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    2. Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November.
    3. Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel Import and the Pricing of Pharmaceutical Products: Evidence from the European Union," Working Paper Series 622, Research Institute of Industrial Economics.
    4. J. S. Chard & C. J. Mellor, 1989. "Intellectual Property Rights and Parallel Imports," The World Economy, Wiley Blackwell, vol. 12(1), pages 69-84, 03.
    5. Giaccotto, Carmelo & Santerre, Rexford E & Vernon, John A, 2005. "Drug Prices and Research and Development Investment Behavior in the Pharmaceutical Industry," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 195-214, April.
    6. Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, 09.
    7. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
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