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Price competition in the chinese pharmaceutical market

  • Y. Wang

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    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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    File URL: http://hdl.handle.net/10.1007/s10754-006-5558-5
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    Article provided by Springer in its journal International Journal of Health Care Finance and Economics.

    Volume (Year): 6 (2006)
    Issue (Month): 2 (June)
    Pages: 119-129

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    Handle: RePEc:kap:ijhcfe:v:6:y:2006:i:2:p:119-129
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=106603

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    1. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
    2. Danzon, Patricia M & Chao, Li-Wei, 2000. "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 311-57, October.
    3. 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.
    4. 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.
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