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Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry

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  • Izabela Jelovac

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  • Catalina Bordoy

Abstract

In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients’ level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 5-21, January.
  • Handle: RePEc:kap:ijhcfe:v:5:y:2005:i:1:p:5-21
    DOI: 10.1007/s10754-005-6599-x
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    References listed on IDEAS

    as
    1. Izabela Jelovac, 2015. "On the relationship between the negotiated prices of pharmaceuticals and the patients' co-payment," Economics Bulletin, AccessEcon, vol. 35(1), pages 481-493.
    2. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
    3. Ganslandt, Mattias & Maskus, Keith E., 2001. "Parallel imports of pharmaceutical products in the European Union," Policy Research Working Paper Series 2630, The World Bank.
    4. repec:hhs:iuiwop:546 is not listed on IDEAS
    5. Jerry A. Hausman & Jeffrey K. MacKie-Mason, 1988. "Price Discrimination and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 253-265, Summer.
    6. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, September.
    7. Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, March.
    8. 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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    Keywords

    parallel imports; welfare;

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