Price competition in the chinese pharmaceutical market
We study price competition between high-quality global products and low-quality local products in a developing country, i.e., China, Nearly all previous studies on pharmaceutical price competition focused on developed countries with bioequivalent generics. In China, local generic products are not bioequivalent and are deemed of lower quality, while global products in the same class are considered similar in quality and better substitutes. We hypothesize that local generic competition drives down local product price but not global product price. In addition, we hypothesize that therapeutic competition among similar global products lowers global product price. Our empirical results support both hypotheses. Number of local generic competitors has a significantly negative effect on local product price but no effect on global product price, while number of global therapeutic competitors has a significantly negative effect on global product price. Policy changes that encourage bioequivalent local products and accelerate global product approvals will enhance price competition in China. Copyright Springer Science + Business Media, LLC 2006
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Volume (Year): 6 (2006)
Issue (Month): 2 (June)
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References listed on IDEAS
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John Wiley & Sons, Ltd., vol. 14(3), pages 269-292.
- Patricia M. Danzon & Y. Richard Wang & Liang Wang, 2003. "The Impact of Price Regulation on the Launch Delay of New Drugs - Evidence from Twenty-Five Major Markets in the 1990s," NBER Working Papers 9874, National Bureau of Economic Research, Inc.
- Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
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