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Price and welfare effects of a pharmaceutical substitution reform

Author

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  • Granlund, David

    () (Department of Economics, Umeå University)

Abstract

The price effects of the Swedish pharmaceutical substitution reform are analyzed using data for a panel of all pharmaceutical product sold in Sweden in 1997—2007. The price reduction due to the reform was estimated to average 10% and was found to be significantly larger for brand name pharmaceuticals than for generics. The results also imply that the reform amplified the effect of generic entry has on brand-name prices by a factor of ten. Results of a demand-estimation imply that the price reductions increased total pharmaceutical consumption by 8% and consumer welfare by SEK 2.7 billion annually.

Suggested Citation

  • Granlund, David, 2009. "Price and welfare effects of a pharmaceutical substitution reform," Umeå Economic Studies 777, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0777
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    More about this item

    Keywords

    drugs; generic competition; equivalent variation; demand estimation;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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