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On insurance and the cost-sharing of pharmaceutical R&D

Author

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  • Pedro Pita Barros
  • Xavier Martínez-Giralt

Abstract

Ramsey pricing has been proposed in the pharmaceutical industry as a principle to price discriminate among markets while allowing to recover the (fixed) R&D cost. However, such analyses neglect the presence of insurance or the fund raising costs for drug reimbursement. By incorporating these new elements, we aim at providing some building blocks towards an economic theory merging Ramsey pricing, equity concerns by governments and the strategic incentives, as governments also determine the reimbursement level in countries with a NHS-like system. This will have important implications to the application of Ramsey pricing principles to pharmaceutical products across countries.

Suggested Citation

  • Pedro Pita Barros & Xavier Martínez-Giralt, 2006. "On insurance and the cost-sharing of pharmaceutical R&D," Working Papers 293, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:293
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    References listed on IDEAS

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    1. Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November.
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    3. Juan-José Ganuza & Gerard Llobet & Beatriz Domínguez, 2009. "R& D in the Pharmaceutical Industry: A World of Small Innovations," Management Science, INFORMS, vol. 55(4), pages 539-551, April.
    4. Sam Allgood & Arthur Snow, 2006. "Marginal Welfare Costs of Taxation with Human and Physical Capital," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 451-464, July.
    5. Frank, Richard G., 2003. "New estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 325-330, March.
    6. Besley, Timothy J., 1988. "Optimal reimbursement health insurance and the theory of Ramsey taxation," Journal of Health Economics, Elsevier, vol. 7(4), pages 321-336, December.
    7. William Jack & Jean O. Lanjouw, 2005. "Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute?," World Bank Economic Review, World Bank Group, vol. 19(1), pages 45-67.
    8. Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-308, March.
    9. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
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    Keywords

    Ramsey pricing; coinsurance.;

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