External referencing and pharmaceutical price negotiation
External referencing (ER) imposes a price cap for pharmaceuticals based on prices of identical products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm while a home country (H) can either negotiate independently or implement ER based on the foreign price. We show that country H always prefers ER if (i) it can condition ER on the drug being subsidized in the foreign country and (ii) copayments are higher in H than in F. H's preference isreinforced when the difference between country copayments is large and/or H's population is small. External referencing by H always harms F if (ii) holds, but less so if (i) holds.
|Date of creation:||2011|
|Date of revision:|
|Publication status:||Published, Health Economics, 2011, 20, 6, pp. 737-756|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00303682/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
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