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Pharmaceutical cost-sharing systems and savings for health care systems from parallel trade


  • Birg, Laura


This paper analyzes the consequences of parallel trade on health care systems in a two-country model with a vertical distributor relationship. In particular, two cost-sharing systems - coinsurance and indemnity insurance - are compared with respect to changes in copayments and public health expenditure. Under both cost-sharing systems, parallel trade generates a price-decreasing competition effect in the destination country and a price-increasing double marginalization effect in the source country. In the destination country, copayments for patients decrease to a larger extent under indemnity insurance, whereas reductions of public health expenditure occur only under coinsurance. In the source country, copayments increase less under coinsurance, whereas health expenditure is reduced more under indemnity insurance. This illustrates that a harmonization of health care systems would not make sense.

Suggested Citation

  • Birg, Laura, 2013. "Pharmaceutical cost-sharing systems and savings for health care systems from parallel trade," Center for European, Governance and Economic Development Research Discussion Papers 179, University of Goettingen, Department of Economics.
  • Handle: RePEc:zbw:cegedp:179

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    References listed on IDEAS

    1. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
    2. 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.
    3. 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.
    4. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.
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    More about this item


    cost-sharing; parallel trade; coinsurance rates; indemnity insurance;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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