Pharmaceutical regulation at the wholesale level and parallel trade

Laura Birg

No 180, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: This paper studies the effect of pharmaceutical regulation at the wholesale level, if markets are integrated by parallel trade, i.e. trade outside the manufacturer´s authorized distribution channel. In particular, maximum wholesale margins, a restriction of pricing by the intermediary, and mandatory rebates, a restriction of the pricing by the manufacturer, are analyzed with respect to their effect on drug prices, quantities, and public pharmaceutical expenditure. Maximum wholesale margins enhance the manufacturer´s ability to reduce competition from parallel trade in the destination country by increasing wholesale prices. In a symmetric equilibrium, maximum wholesale margins of both countries partly offset each other. Mandatory rebates may be a policy alternative, as they exhibit a reinforcing effect with respect to drug prices.

Keywords: parallel trade; regulation; maximum markups; spillovers; mandatory rebates (search for similar items in EconPapers)
JEL-codes: F12 I11 I18 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com, nep-hea and nep-int
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:180

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