Pharmaceutical regulation and health policy objectives

Laura Birg

No 183, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: This paper analyzes a maximum price system and a reference price system in a vertical differentiation model with a brand-name drug and a generic. In particular, both instruments are compared with respect to their performance in reducing public expenditure, limiting financial exposure of patients, improving access to pharmaceuticals, and stimulating competition. For identical regulatory prices, free pricing under the reference system tends to result in a higher price for the brand-name drug. For identical price reductions of the brand-name drug, the lower reimbursement amount under the reference price system results in lower health expenditure, but higher financial exposure of patients. Total welfare is higher under the maximum price system.

Keywords: pharmaceutical regulation; reference price; maximum price; price cap; health; policy objectives (search for similar items in EconPapers)
JEL-codes: H51 I18 L50 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com, nep-hea, nep-ind, nep-mkt and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:183

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