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Modelling pharmaceutical price changes in Germany: a function of competition and regulation

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  • Tom Stargardt

Abstract

In this article, price changes for pharmaceuticals in Germany are modelled as a function of regulation and competition. Changes in the regulatory environment, and in the competitive environment of a product, are taken into account. To follow the hierarchical structure, a four-level random intercept model was constructed. Price changes were allowed to vary randomly between drug classes, between different substances within a drug class, and between different manufacturers of a substance. This study provides evidence that two policy measures - reference pricing and temporary price freezes - succeeded in reducing prices in Germany between January 2004 and June 2006. For off-patent substances - depending on the competition faced by a drug - the effect of competition can be greater than the effect of regulation. The study, therefore, not only demonstrates the importance of competition between and within drug classes, it also provides evidence that generic entry has substantial effects on the prices of branded products.

Suggested Citation

  • Tom Stargardt, 2011. "Modelling pharmaceutical price changes in Germany: a function of competition and regulation," Applied Economics, Taylor & Francis Journals, vol. 43(29), pages 4515-4526.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:29:p:4515-4526
    DOI: 10.1080/00036846.2010.491470
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    References listed on IDEAS

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    1. Jaume Puig, 2005. "The impact of generic reference pricing interventions in the statin market," Working Papers, Research Center on Health and Economics 906, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Jaume Puig, 2005. "The impact of generic reference pricing interventions in the statin market," Economics Working Papers 906, Department of Economics and Business, Universitat Pompeu Fabra.
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    Cited by:

    1. Herr, A. & Suppliet, M., 2011. "Co-Payment Exemptions and Reference Prices: an Empirical Study of Pharmaceutical Prices in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 11/18, HEDG, c/o Department of Economics, University of York.
    2. Hostenkamp, Gisela, 2013. "Do follow-on therapeutic substitutes induce price competition between hospital medicines? Evidence from the Danish hospital sector," Health Policy, Elsevier, vol. 111(1), pages 68-77.
    3. 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.
    4. Petrou, Panagiotis & Vandoros, Sotiris, 2015. "Cyprus in crisis: Recent changes in the pharmaceutical market and options for further reforms without sacrificing access to or quality of treatment," Health Policy, Elsevier, vol. 119(5), pages 563-568.
    5. Michael Mueller & Alexander Frenzel, 2015. "Competitive pricing within pharmaceutical classes: evidence on “follow-on” drugs in Germany 1993–2008," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(1), pages 73-82, January.
    6. Vandoros, Sotiris & Stargardt, Tom, 2013. "Reforms in the Greek pharmaceutical market during the financial crisis," Health Policy, Elsevier, vol. 109(1), pages 1-6.

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