Parallel Imports, Drag Price Control and Pharmaceutical Innovation
This paper examines how parallel importation influences pharmaceutical innovation and the welfare of the economy, when crossnational drug price differentials occur not only because of demand elasticity based factors, but also governmental drug price control based factors. By explicitly considering the governmental drug price control baaed factors, this paper shows that parallel importation may enhance pharmaceutical innovation, when the bargaining power of a foreign government is strong and the price elasticity of demand in the foreign market is small. We also show that the increase in R&D induced by parallel imports may even increase the consumer surplus of a country with high demand elasticities and which could face relatively low drug prices, if parallel imports were not allowed.
|Date of creation:||Aug 2005|
|Date of revision:||Aug 2005|
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- Valletti, Tommaso M., 2006. "Differential pricing, parallel trade, and the incentive to invest," Journal of International Economics, Elsevier, vol. 70(1), pages 314-324, September.
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"Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis,"
CEIS Research Paper
75, Tor Vergata University, CEIS.
- Szymanski, Stefan & Valletti, Tommaso, 2005. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEPR Discussion Papers 5022, C.E.P.R. Discussion Papers.
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