Multimarket contact in pharmaceutical markets

Javier Coronado, Sergi Jimenez-Martin and Pedro L. Marín

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

Abstract: We analyze the effect of multimarket contact on the pricing behavior of pharmaceutical firms controlling for different levels of regulatory constraints using the IMS MIDAS database for the industry. Theoretically, under product differentiation, firms may find it profitable to allocate their market power among markets where they are operating, specifically from more collusive to more competitive ones. We present evidence for nine OECD countries suggesting the existence of a multimarket effect for more market friendly countries (U.S. and Canada) and less regulated ones (U.K., Germany, Netherlands), while the results are more unstable for highly regulated countries with some countries being consistent with the theory (France) while others contradicting it (Japan, Italy and Spain). A key result indicates that in the latter countries, price constraints are so intense, that there is little room for allocating market power. Thus equilibrium prices are expected in general to be lower in regulated countries.

Keywords: Pharmaceutical prices; Multimarket Contact; Regulation (search for similar items in EconPapers)
JEL-codes: I18 L11 L13 L65 (search for similar items in EconPapers)
Date: 2007-04, Revised 2007-07
New Economics Papers: this item is included in nep-com, nep-hea, nep-ind, nep-mic and nep-reg
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Multimarket Contact in Pharmaceutical Markets (2015)
Working Paper: Multimarket Contact in Pharmaceutical Markets (2008)
Working Paper: Multimarket Contact in Pharmaceutical Markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1033

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