IDEAS home Printed from https://ideas.repec.org/p/hhs/umnees/0831.html
   My bibliography  Save this paper

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

Author

Listed:
  • Granlund, David

    (Department of Economics, Umeå University)

  • Yesim Köksal, Miyase

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

Abstract

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.

Suggested Citation

  • Granlund, David & Yesim Köksal, Miyase, 2011. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," Umeå Economic Studies 831, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0831
    as

    Download full text from publisher

    File URL: http://www.econ.umu.se/DownloadAsset.action?contentId=167749&languageId=3&assetKey=ues831
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Brekke, Kurt R. & Grasdal, Astrid L. & Holms, Tor Helge, 2009. "Regulation and pricing of pharmaceuticals: Reference pricing or price cap regulation?," European Economic Review, Elsevier, vol. 53(2), pages 170-185, February.
    3. 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.
    4. 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, September.
    5. Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 5-21, January.
    6. Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel imports and the pricing of pharmaceutical products: evidence from the European Union," Journal of Health Economics, Elsevier, vol. 23(5), pages 1035-1057, September.
    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. 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 26 Jun 2020.
    10. 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.
    11. 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.
    12. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Laura Birg, 2015. "Externalities of National Pharmaceutical Policy when Markets are Integrated through Parallel Trade," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 558-574, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Granlund, David & Yesim Köksal, Miyase, 2012. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?," HUI Working Papers 59, HUI Research.
    2. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    3. Granlund, David & Yesim Köksal, Miyase, 2011. "EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals. What's blame? Derogation or perception?," Working Papers in Economics 499, University of Gothenburg, Department of Economics.
    4. Granlund, David, 2012. "The effect of pharmacies’ right to negotiate discounts on the market share of parallel imported pharmaceuticals," HUI Working Papers 75, HUI Research.
    5. 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.
    6. David Granlund & Miyase Koksal-Ayhan, 2015. "Parallel imports and a mandatory substitution reform: a kick or a muff for price competition in pharmaceuticals?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(9), pages 969-983, December.
    7. David Granlund, 2022. "The Price Effects of Competition from Parallel Imports and Therapeutic Alternatives: Using Dynamic Models to Estimate the Causal Effect on the Extensive and Intensive Margins," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(1), pages 63-92, February.
    8. 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.
    9. Kaiser, Ulrich & Mendez, Susan J. & Rønde, Thomas & Ullrich, Hannes, 2014. "Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark," Journal of Health Economics, Elsevier, vol. 36(C), pages 174-187.
    10. Frank Mueller-Langer, 2014. "Copyright and parallel trade," Chapters, in: Richard Watt (ed.), Handbook on the Economics of Copyright, chapter 16, pages 287-310, Edward Elgar Publishing.
    11. Tomaso Duso & Annika Herr & Moritz Suppliet, 2014. "The Welfare Impact Of Parallel Imports: A Structural Approach Applied To The German Market For Oral Anti‐Diabetics," Health Economics, John Wiley & Sons, Ltd., vol. 23(9), pages 1036-1057, September.
    12. Laura Birg, 2015. "Externalities of National Pharmaceutical Policy when Markets are Integrated through Parallel Trade," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 558-574, August.
    13. Mueller-Langer, Frank, 2010. "An analysis of the ambiguous welfare effects of parallel trade freedom," MPRA Paper 35704, University Library of Munich, Germany.
    14. Costa-i-Font, Joan & Kanavos, Panos, 2007. "Medicines in parallel trade in the European Union: a gravity specification," LSE Research Online Documents on Economics 28787, London School of Economics and Political Science, LSE Library.
    15. Susan J. Méndez, 2018. "Parallel trade of pharmaceuticals: The Danish market for statins," Health Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 333-356, February.
    16. Giorgio Gnecco & Berna Tuncay & Fabio Pammolli, 2018. "A Comparison of Game-Theoretic Models for Parallel Trade," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-57, September.
    17. Birg, Laura, 2013. "Pharmaceutical cost-sharing systems and savings for health care systems from parallel trade," University of Göttingen Working Papers in Economics 179, University of Goettingen, Department of Economics.
    18. Shen Guo & Bin Hu & Hai Zhong, 2013. "Impact of parallel trade on pharmaceutical firm’s profits: rise or fall?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(2), pages 345-355, April.
    19. repec:iae:iaewps:wp2016n8 is not listed on IDEAS
    20. Hwang, Hong & Peng, Cheng-Hau & Shih, Pei-Cyuan, 2014. "Parallel imports, product innovation and market structures," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 237-245.
    21. Santanu Roy & Kamal Saggi, 2023. "Equilibrium parallel import policies and international market structure," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 15, pages 349-363, World Scientific Publishing Co. Pte. Ltd..

    More about this item

    Keywords

    EU enlargement; parallel trade; pharmaceuticals; price competition;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:umnees:0831. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Skog (email available below). General contact details of provider: https://edirc.repec.org/data/inumuse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.