Reference Pricing Versus Co-Payment in the Pharmaceutical Industry: Firm's Pricing Strategies
Within a horizontally differentiation model and allowing for heterogeneous qualities, we analyze the effects of reference pricing reimbursement on firms’ pricing strategies. With this analysis we find inherent incentives for firms’ pricing behaviour, and consequently we shed some light on time consistency of such policy. The analysis encompasses different reference price rules. Results show that if drugs have equal quality, reference pricing may lead to higher prices. With quality differentiation both the minimum and linear policies unambiguously lead to higher prices.
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- Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management.
- Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
- Ma, Ching-to Albert, 1994.
"Health Care Payment Systems: Cost and Quality Incentives,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
- Ching-to Albert Ma, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Papers 0047, Boston University - Industry Studies Programme.
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