Price and welfare effects of a pharmaceutical substitution reform

David Granlund ()
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David Granlund: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 777, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The price effects of the Swedish pharmaceutical substitution reform are analyzed using data for a panel of all pharmaceutical product sold in Sweden in 1997—2007. The price reduction due to the reform was estimated to average 10% and was found to be significantly larger for brand name pharmaceuticals than for generics. The results also imply that the reform amplified the effect of generic entry has on brand-name prices by a factor of ten. Results of a demand-estimation imply that the price reductions increased total pharmaceutical consumption by 8% and consumer welfare by SEK 2.7 billion annually.

Keywords: drugs; generic competition; equivalent variation; demand estimation (search for similar items in EconPapers)
JEL-codes: D40 I11 L65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-hea, nep-mkt and nep-reg
Date: 2009-08-13

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Persistent link: http://EconPapers.repec.org/RePEc:hhs:umnees:0777

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