Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark

Ulrich Kaiser (), Susan Mendez, Thomas Rønde () and Hannes Ullrich
Additional contact information
Thomas Rønde: Copenhagen Business School

No 7248, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Reference prices constitute a main determinant of patient health care reimbursement in many countries. We study the effects of a change from an "external" (based on a basket of prices in other countries) to an "internal" (based on comparable domestic products) reference price system. We find that while our estimated consumer compensating variation is small, the reform led to substantial reductions in list and reference prices as well as co-payments, and to sizeable decreases in overall producer revenues, health care expenditures, and co-payments. These effects differ markedly between branded drugs, generics, and parallel imports with health care expenditures and producer revenues decreasing and co-payments increasing most for branded drugs. The reform also induced consumers to substitute from branded drugs – for which they have strong preferences – to generics and parallel imports. This substitution also explains the small increase in consumer welfare despite a substantial decrease in expenditures.

Keywords: co-payments; welfare effects; regulation; pharmaceutical markets; reference pricing (search for similar items in EconPapers)
JEL-codes: C23 I18 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2013-02
New Economics Papers: this item is included in nep-com, nep-eur, nep-hea, nep-mkt and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: Journal of Health Economics, 2014, 36, 174-187

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Related works:
Journal Article: Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark (2014)
Working Paper: Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark (2013)
Working Paper: Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark (2013)
Working Paper: Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark (2010)
Working Paper: Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark (2010)
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