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Effects of the German reference drug program on ex-factory prices of prescription drugs: a panel data approach

  • Boris Augurzky
  • Silja Göhlmann

    (RWI Essen, Essen, Germany)

  • Stefan Gre�

    (University of Applied Sciences, Fulda, Germany)

  • Jürgen Wasem

    (University of Duisburg-Essen, Essen, Germany)

This paper examines effects of the German social health insurance system's reference drug program (RDP) for prescription drugs on ex-factory prices. Moreover, we analyze whether manufacturers adapt prices of their products that are not subject to reference pricing as a consequence of changes in reference prices of their products that are subject to reference pricing. We use econometric panel data methods based on a large panel data set of nearly all German prescription drugs on a monthly basis between October 1994 and July 2005. They provide information on ex-factory prices, reference prices, manufacturers, type of prescription drug, and market entries and exits. Our results show that there is no full price adjustment: A 1%-change in reference prices leads to a 0.3%-change in market prices. Price adjustment, however, is fast - it mostly happens in the first month. Furthermore, the first introduction of a reference price reduces market prices of the affected products by approximately 7%. Finally, we observe a significant time effect that is positive in the market without reference prices and negative in the market with reference prices. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1376
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 18 (2009)
Issue (Month): 4 ()
Pages: 421-436

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Handle: RePEc:wly:hlthec:v:18:y:2009:i:4:p:421-436
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. Puig-Junoy, Jaume, 2007. "The impact of generic reference pricing interventions in the statin market," Health Policy, Elsevier, vol. 84(1), pages 14-29, November.
  2. Schneeweiss, Sebastian, 2007. "Reference drug programs: Effectiveness and policy implications," Health Policy, Elsevier, vol. 81(1), pages 17-28, April.
  3. Stefan Gress & Dea Niebuhr & Uwe May & Jurgen Wasem, 2007. "Reform of Prescription Drug Reimbursement and Pricing in the German Social Health Insurance Market: A Comparison of Three Scenarios," PharmacoEconomics, Springer Healthcare | Adis, vol. 25(6), pages 443-454.
  4. Zweifel, Peter & Crivelli, Luca, 1996. "Price Regulation of Drugs: Lessons from Germany," Journal of Regulatory Economics, Springer, vol. 10(3), pages 257-73, November.
  5. Patricia M. Danzon & Jonathan D. Ketcham, 2004. "Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand," NBER Chapters, in: Frontiers in Health Policy Research, Volume 7, pages 1-54 National Bureau of Economic Research, Inc.
  6. Jaume Puig-Junoy, 2005. "What is Required to Evaluate the Impact of Pharmaceutical Reference Pricing?," Applied Health Economics and Health Policy, Springer Healthcare | Adis, vol. 4(2), pages 87-98.
  7. Nina Pavcnik, 2002. "Do Pharmaceutical Prices Respond to Potential Patient Out-of-Pocket Expenses?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 469-487, Autumn.
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