Price Control, Different Demands Between Countries, and Parallel Trade in Pharmaceuticals

Hai Zhong ()

No 20065, University of Western Ontario, Economic Policy Research Institute Working Papers from University of Western Ontario, Economic Policy Research Institute

Abstract: In recent years, there are growing concerns on the issue of parallel trade on pharmaceuticals. It is an existing issue in the European Union and an emerging issue in North America and Asia. In this paper, a model is developed to explore the following issues in the presence of parallel trade: 1) the change of firm's profits; 2) drug price, supply and social welfare in the importing country; 3) drug price, supply and social welfare in the exporting country. The possible policy reactions of the government in the two countries are also discussed. By relaxing some assumptions, I extend the existing studies to a more general situation.

Date: 2006
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