Regulation, generic competition and pharmaceutical prices: Theory and evidence from a natural experiment

Kurt Brekke (), Tor Helge Holmås () and Odd Rune Straume
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Tor Helge Holmås: Institute for Research in Economics and Business Administration, and Health Economics Bergen, http://www.nhh.no/en/research---faculty/research---publications/who%60s-who-database.aspx

No 01/2008, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We study the impact of regulatory regimes on generic competition and pharmaceutical pricing using a unique policy experiment in Norway, where reference pricing (RP) replaced price cap regulation in 2003 for a sub-sample of off-patent products. We exploit a detailed panel dataset at product level covering a wide set of off-patent drugs before and after the policy reform. Off-patent drugs not subject to reference pricing serve as our control group. We find that RP leads to lower relative prices, with the effect being driven by strong brand-name price reductions, and not increases in generic prices. We also find that RP increases generic competition, resulting in lower brand-name market shares. Finally, we show that RP has a strong negative effect on average prices at molecule level, suggesting significant cost-savings.

Keywords: Pharmaceuticals; Regulation; Generic Competition. (search for similar items in EconPapers)
JEL-codes: I11 I18 L13 L65 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-com, nep-ipr, nep-pr~, nep-mic, nep-mkt and nep-reg
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Citations: View citations in EconPapers (7)

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