The determinants of pricing in pharmaceuticals: Are U.S. prices really higher than those of Canada?

Antonio Cabrales and Sergi Jimenez-Martin

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper studies price determination in pharmaceutical markets using data for 25 countries, six years and a comprehensive list of products from the MIDAS IMS database. We show that market power and the quality of the product has a significantly positive impact of prices. The nationality of the producer appears to have a small and often insignificant impact on prices, which suggests that countries which regulates prices have relatively little power to do it in a way that advances narrow national interest. We produce a theoretical explanation for this phenomenon based on the fact that low negotiated prices in a country would have a knock-on effect in other markets, and is thus strongly resisted by producers. Another key finding is that the U.S. has prices that are not significantly higher than those of countries with similar income levels. This, together with the former observation on the effect of the nationality of producers casts doubt on the ability of countries to pursue "free-riding" regulation.

Keywords: Pharmaceutical; prices (search for similar items in EconPapers)
JEL-codes: I10 I18 L65 (search for similar items in EconPapers)
Date: 2007-04
New Economics Papers: this item is included in nep-hea and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Determinants of Pricing in Pharmaceuticals: Are U.S. prices really higher than those of Canada? (2015)
Working Paper: The Determinants of Pricing in Pharmaceuticals: Are U.S. Prices Really Higher than Those of Canada? (2007)
Working Paper: The determinants of pricing in pharmaceuticals: are U.S. prices really higher than those of Canada? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1032

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