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On the welfare analysis of external reference pricing and reimbur-sement policy

Author

Listed:
  • Van-Chung Dong
  • Yan-Shu Lin
  • Pei-Cyuan Shih

Abstract

The co-existence of external referencing pricing (ERP) and reimbursement policy is common in many countries. Thus, this research examines whether or not the imposition of ERP is socially desirable in the presence of reimbursement policy. For direct sales channel, we find that the home social welfare is worse-off with ERP if the home copayment rate is too high. Our main results are robust under indirect sales channel. Moreover, the home social welfare under the pharmacy-purchasing-price (PPP) ERP is larger than that under the ex-factory-price (EFP) ERP if the home copayment rate is high enough. Finally, the profit of brand-name firm under indirect sales channel is higher than that under direct sales channel if the home copayment rate is too high.

Suggested Citation

  • Van-Chung Dong & Yan-Shu Lin & Pei-Cyuan Shih, 2023. "On the welfare analysis of external reference pricing and reimbur-sement policy," Estudios de Economia, University of Chile, Department of Economics, vol. 50(1 Year 20), pages 133-158, June.
    • Handle: RePEc:udc:esteco:v:50:y:2023:i:1:p:133-158
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    File URL: https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/70873/73186
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    More about this item

    Keywords

    Copayment rate; direct and indirect sales channeles; external refe-rence pricing; reimbursement policy.;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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