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Assessing the Impact of Global Price Interdependencies

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  • Anke Richter

Abstract

Documented launch delays and the ensuing debate over their underlying causes have focused on assessment from the individual country’s perspective. Seen in a larger game theoretical framework this may cause problems, because although the countries see an individual game, the pharmaceutical firm sees a repeated linked game. The links are due to external reference pricing and parallel trade. Behaviours that are optimal in the single, individual game (for either the country or the pharmaceutical firm) may no longer be optimal when considering the global repeated game. A theoretical mixed integer linear model of the firm’s launch and pricing decisions is presented along with examples wherein international price dependencies most likely played a role. This model can help countries understand the implication of their external reference pricing policies on the global repeated pricing game. Understanding the behaviour of the pharmaceutical firm in this global context aids countries in designing policies to maximize the welfare of their citizens. Copyright Adis Data Information BV 2008

Suggested Citation

  • Anke Richter, 2008. "Assessing the Impact of Global Price Interdependencies," PharmacoEconomics, Springer, vol. 26(8), pages 649-659, August.
    • Handle: RePEc:spr:pharme:v:26:y:2008:i:8:p:649-659
    DOI: 10.2165/00019053-200826080-00003
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    1. Nicolas Houy & Izabela Jelovac, 2015. "Drug Launch Timing and International Reference Pricing," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 978-989, August.
    2. Foad Iravani & Hamed Mamani & Emisa Nategh, 2020. "External Reference Pricing and Parallel Imports of Pharmaceuticals: A Policy Comparison," Production and Operations Management, Production and Operations Management Society, vol. 29(12), pages 2716-2735, December.
    3. Birg, Laura, 2016. "External reference pricing and the choice of country baskets and pricing rules," University of Göttingen Working Papers in Economics 279, University of Goettingen, Department of Economics.

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