The Determinants of Pricing in Pharmaceuticals: Are U.S. prices really so high?

Antonio Cabrales () and Sergi Jimenez-Martin ()

No 2008-18, Working Papers from FEDEA

Abstract: This paper studies price determination in pharmaceutical markets using data for 25 countries, six years and a comprehensive list of products from the MIDAS IMS database. A key finding is that the U.S. has prices that are not significantly higher than those of countries with similar income levels, specially those that are "lightly regulated". More importantly, price differences to the US levels increase for "branded" or innovative products, and decrease, regardless of the level of regulation for mature or widely diffused molecules. In addition, the nationality of the producer appears to have a small and often in significant impact on prices. We have constructed a theoretical model that accounts for all these findings simultaneously. One interesting aspect of the model is that it shows that reference pricing confers a degree of protection against government intervention. Thus, there is a sense in which a reference price (or similar) policy in one country becomes a “commitment device to avoid lowering price in another one.

New Economics Papers: this item is included in nep-hea, nep-ind, nep-mkt and nep-reg
Date: 2008-05
View list of references

Downloads: (external link)
http://www.fedea.es/pub/Papers/2008/dt2008-18.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fda:fdaddt:2008-18

Access Statistics for this paper

More papers in Working Papers from FEDEA
Series data maintained by Carmen Arias ().