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Price and welfare effects of a pharmaceutical substitution reform

  • Granlund, David
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    The price effects of the Swedish pharmaceutical substitution reform are analyzed using data for a panel of all pharmaceutical product sold in Sweden in 1997-2007. The price reduction due to the reform was estimated to average 10% and was found to be significantly larger for brand-name pharmaceuticals than for generics. The results also imply that the reform amplified the effect that generic entry has on brand-name prices by a factor of 10. Results of a demand estimation imply that the price reductions increased total pharmaceutical consumption by 8% and consumer welfare by SEK 2.7 billion annually.

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    File URL: http://www.sciencedirect.com/science/article/B6V8K-50THX59-1/2/3a98d75bf3685d0535bf26f3c0840a47
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    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 29 (2010)
    Issue (Month): 6 (December)
    Pages: 856-865

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    Handle: RePEc:eee:jhecon:v:29:y:2010:i:6:p:856-865
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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    1. Panle Gia & Pinelopi K. Goldberg & Shubham Chaudhuri, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," American Economic Review, American Economic Association, vol. 96(5), pages 1477-1514, December.
    2. Reekie, W Duncan, 1978. "Price and Quality Competition in the United States Drug Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 26(3), pages 223-37, March.
    3. Granlund, David & Rudholm, Niklas, 2007. "Consumer Information and Pharmaceutical Prices: Theory and Evidence," Umeå Economic Studies 709, Umeå University, Department of Economics.
    4. Grabowski, Henry G & Vernon, John M, 1992. "Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 331-50, October.
    5. Richard G. Frank & David S. Salkever, 1997. "Generic Entry and the Pricing of Pharmaceuticals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 75-90, 03.
    6. Granlund, David & Rudholm, Niklas, 2008. "Consumer Loyalty in the Swedish Pharmaceuticals Market," HUI Working Papers 17, HUI Research.
    7. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
    8. Jayashree Watal, 2000. "Pharmaceutical Patents, Prices and Welfare Losses: Policy Options for India Under the WTO TRIPS Agreement," The World Economy, Wiley Blackwell, vol. 23(5), pages 733-752, 05.
    9. Z. John Lu & William S. Comanor, 1998. "Strategic Pricing Of New Pharmaceuticals," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 108-118, February.
    10. Getzen, Thomas E., 2000. "Health care is an individual necessity and a national luxury: applying multilevel decision models to the analysis of health care expenditures," Journal of Health Economics, Elsevier, vol. 19(2), pages 259-270, March.
    11. Granlund, David, 2009. "Are private physicians more likely to veto generic substitution of prescribed pharmaceuticals?," Social Science & Medicine, Elsevier, vol. 69(11), pages 1643-1650, December.
    12. Andersson, Karolina & Bergstrom, Gina & Petzold, Max G. & Carlsten, Anders, 2007. "Impact of a generic substitution reform on patients' and society's expenditure for pharmaceuticals," Health Policy, Elsevier, vol. 81(2-3), pages 376-384, May.
    13. Granlund, David & Rudholm, Niklas, 2007. "Consumer Information and Pharmaceutical Prices: Theory and Evidence," HUI Working Papers 8, HUI Research.
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