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Pricing and Welfare of Parallel Imports in the Pharmaceutical Industry

Author

Listed:
  • Bordoy, Catalina
  • Jelovac, Izabela

    (MERIT)

Abstract

In this paper we investigate the implications of permitting parallel imports ofpharmaceuticals produced by a monopoly, from one country to another. We use a modelwhere countries differ in the patients’ level of co-payment for buying pharmaceuticals, andpatients differ in the utility obtained from the consumption of pharmaceuticals. We show thatthe effects of parallel imports on total welfare are as follows: On the one hand, whencountries differ in their health system only, parallel imports decrease total welfare; On theother hand, when countries differ in the health needs of their patients only, parallel importsenhance total welfare.

Suggested Citation

  • Bordoy, Catalina & Jelovac, Izabela, 2003. "Pricing and Welfare of Parallel Imports in the Pharmaceutical Industry," Research Memorandum 004, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:umamer:2003004
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    File URL: https://www.merit.unu.edu/publications/rmpdf/2003/rm2003-004.pdf
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    References listed on IDEAS

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    1. Izabela Jelovac, 2015. "On the relationship between the negotiated prices of pharmaceuticals and the patients' co-payment," Economics Bulletin, AccessEcon, vol. 35(1), pages 481-493.
    2. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
    3. Ganslandt, Mattias & Maskus, Keith E., 2001. "Parallel imports of pharmaceutical products in the European Union," Policy Research Working Paper Series 2630, The World Bank.
    4. repec:hhs:iuiwop:546 is not listed on IDEAS
    5. 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.
    6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    7. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, September.
    8. 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)

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    Cited by:

    1. Panos Kanavos & Sotiris Vandoros, 2010. "Competition in prescription drug markets: is parallel trade the answer?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 325-338.

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    Keywords

    international economics and trade ;

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