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Parallel Imports and Mandatory Substitution Reform: A kick or a muff for price competition in pharmaceuticals

  • Granlund, David

    ()

    (The Swedish Retail Institute and Umeå University)

  • Yesim Köksal, Miyase

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Registered author(s):

    What has been the effect of competition from parallel imports on prices of locally-sourced onpatent drugs? Did the 2002 Swedish mandatory substitution reform increase this competition? To answer these questions, we carried out difference-in-differences estimation on monthly data for a panel of all on-patent prescription drugs sold in Sweden during the 40 months from January 2001 through April 2004. On average, facing competition from parallel imports caused a 15-17% fall in price. While the reform increased the effect of competition from parallel imports, it was only by 0.9%. The reform, however, did increase the effect of therapeutic competition by 1.6%.

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    File URL: http://hdl.handle.net/2077/25497
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    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 496.

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    Length: 32 pages
    Date of creation: 18 Apr 2011
    Date of revision:
    Handle: RePEc:hhs:gunwpe:0496
    Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
    Web page: http://www.handels.gu.se/econ/

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    1. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
    2. Brekke, Kurt R & Königbauer, Ingrid & Straume, Odd Rune, 2005. "Reference Pricing of Pharmaceuticals," Working Papers in Economics 19/05, University of Bergen, Department of Economics.
    3. Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel Import and the Pricing of Pharmaceutical Products: Evidence from the European Union," Working Paper Series 622, Research Institute of Industrial Economics.
    4. Thomas Aronsson & Mats Bergman & Niklas Rudholm, 2001. "The Impact of Generic Drug Competition on Brand Name Market Shares – Evidence from Micro Data," Review of Industrial Organization, Springer, vol. 19(4), pages 423-433, December.
    5. Mats A. Bergman & Niklas Rudholm, 2003. "The Relative Importance of Actual and Potential Competition: Empirical Evidence From the Pharmaceuticals Market," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 455-467, December.
    6. Kurt R. Brekke & Astrid L. Grasdal & Tor Helge Holmås, 2007. "Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?," CESifo Working Paper Series 2059, CESifo Group Munich.
    7. David Granlund & Niklas Rudholm, 2011. "Consumer Information and Pharmaceutical Prices: Theory and Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(2), pages 230-254, 04.
    8. 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.
    9. Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, 09.
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    11. Sara Ellison Fisher & Iain Cockburn & Zvi Griliches & Jerry Hausman, 1997. "Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 426-446, Autumn.
    12. Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Care Finance and Economics, Springer, vol. 5(1), pages 5-21, January.
    13. Jorge Mestre, 2003. "Reference prices: The Spanish way," Investigaciones Economicas, Fundación SEPI, vol. 27(1), pages 125-149, January.
    14. Granlund, David, 2010. "Price and welfare effects of a pharmaceutical substitution reform," Journal of Health Economics, Elsevier, vol. 29(6), pages 856-865, December.
    15. Granlund, David, 2009. "Are private physicians more likely to veto generic substitution of prescribed pharmaceuticals?," Social Science & Medicine, Elsevier, vol. 69(11), pages 1643-1650, December.
    16. J. Lundkvist, 2002. "Pricing and reimbursement of drugs in Sweden," The European Journal of Health Economics, Springer, vol. 3(1), pages 66-70, March.
    17. Richard G. Frank & David S. Salkever, 1997. "Generic Entry and the Pricing of Pharmaceuticals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 75-90, 03.
    18. Yongmin Chen & Keith Maskus, 2005. "Vertical Pricing and Parallel Imports," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(1), pages 1-18.
    19. Kyle Margaret, 2011. "Strategic Responses to Parallel Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-34, January.
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