Down to the cents: The case of international drug prices

Bill Hu, Joon Ho Hwang, Christine Jiang, Jim Washam and Li Zeng

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: Using drug prices from the Veteran Affairs office, we document limited clustering on whole dollars and heightened strategic pricing. Surprisingly 97.9% of drugs over $10,000 are priced down to the cents. We find no significant variations in clustering by price levels or uncertainty, rejecting the negotiation hypothesis. Strategic pricing on 01 and 99 increases monotonically as prices decline. For international drug prices, we find significant clustering on integers in Luxembourg and South Africa as price level increases, supporting the negotiation hypothesis. Our findings contribute to better negotiating drug prices to reduce healthcare costs while not discouraging innovations in drug development.

Keywords: Price clustering; Negotiation; Strategic pricing; Uncertainty; International drug prices (search for similar items in EconPapers)
JEL-codes: G18 I18 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612321003615
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003615

DOI: 10.1016/j.frl.2021.102357

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().