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Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry

Author

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  • Izabela Jelovac

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique)

  • Catalina Bordoy

    (MERIT - Maastricht University [Maastricht])

Abstract

In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients' level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare.

Suggested Citation

  • Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," Post-Print hal-03881154, HAL.
    • Handle: RePEc:hal:journl:hal-03881154
    DOI: 10.1007/s10754-005-6599-x
    Note: View the original document on HAL open archive server: https://hal.science/hal-03881154v2
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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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    Keywords

    Parallel Imports; Welfare;

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