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EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?

  • Granlund, David

    ()

    (Department of Economics, Umeå University)

  • Yesim Köksal, Miyase

    ()

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

Registered author(s):

    Given the cost of trade and availability of pharmaceuticals, the driving force for parallel trade is the price difference between the source (exporting) and the destination (importing) country. An increase in the price difference or in the availability of pharmaceuticals for parallel trade should increase price competition in the destination country. Using 2003-2007 data from Sweden we investigated whether EU enlargement in 2004, when new countries with low pharmaceutical prices joined the EU, increased competition from parallel imports. Drugs facing competition from parallel imports are found to have on average 17% to 21% lower prices than they would have had if they had never faced such competition. But, contrary to expectation, EU enlargement is not found to have increased this effect, which might be explained by derogations and changes in consumer perceptions of parallel imports.

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    File URL: http://www.econ.umu.se/DownloadAsset.action?contentId=167749&languageId=3&assetKey=ues831
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    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 831.

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    Length: 28 pages
    Date of creation: 16 Sep 2011
    Date of revision:
    Handle: RePEc:hhs:umnees:0831
    Contact details of provider: Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
    Web page: http://www.econ.umu.se/Email:


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    1. 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.
    2. 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.
    3. Brekke, Kurt R. & Grasdal, Astrid L. & Holmås, Tor Helge, 2006. "Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?," Working Papers in Economics 14/06, University of Bergen, Department of Economics.
    4. Mark E Schaffer, 2005. "XTIVREG2: Stata module to perform extended IV/2SLS, GMM and AC/HAC, LIML and k-class regression for panel data models," Statistical Software Components S456501, Boston College Department of Economics, revised 09 Feb 2015.
    5. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
    6. 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.
    7. Granlund, David & Köksal, Miyase Yesim, 2011. "Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?," HUI Working Papers 49, HUI Research.
    8. Granlund, David & Köksal , Miyase Yesim, 2011. "Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?," Umeå Economic Studies 824, Umeå University, Department of Economics.
    9. 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.
    10. Granlund, David & Yesim Köksal, Miyase, 2011. "Parallel Imports and Mandatory Substitution Reform: A kick or a muff for price competition in pharmaceuticals," Working Papers in Economics 496, University of Gothenburg, Department of Economics.
    11. 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.
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