The strategic interaction between firms and formulary committees: Effects on the prices of new drugs

Maria del Carmen Garcia-Alonso and García-Mariñoso, Begoña ()
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García-Mariñoso, Begoña: Department of Economics, City University, London, http://www.city.ac.uk/economics/

No 07/16, City University Economics Discussion Papers from Department of Economics, City University, London

Abstract: We study the strategic interaction between the pricing decisions of a pharmaceutical firm and the reimbursement decisions of a government agency which grants reimbursement rights to patients for whom new drugs are most cost-effective. If the reimbursement decision precedes pricing, the agency only reimburses some patients if the drug’s private and public health benefits diverge. This is, there are consumption externalities and the variable cost of the drug exceeds the alternative’s. Contrarily, if the firm can commit to a price before reimbursement, a strategic effect implies that by setting a sufficiently high price, the firm can make the agency more willing to reimburse than without commitment.

Keywords: Drug formularies; subsidies. (search for similar items in EconPapers)
JEL-codes: I10 I18 L65 H42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2007-11
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Journal Article: The strategic interaction between firms and formulary committees: Effects on the prices of new drugs (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:cty:dpaper:07/16

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