Parallel Imports, Drag Price Control and Pharmaceutical Innovation

Ken Tabata, Tetsuya Shinkai (), Satoru Tanaka and Makoto Okamura
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Satoru Tanaka: Kobe City University of Foreign Studies
Makoto Okamura: Hiroshima University

No 26, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: This paper examines how parallel importation influences pharmaceutical innovation and the welfare of the economy, when crossnational drug price differentials occur not only because of demand elasticity based factors, but also governmental drug price control based factors. By explicitly considering the governmental drug price control baaed factors, this paper shows that parallel importation may enhance pharmaceutical innovation, when the bargaining power of a foreign government is strong and the price elasticity of demand in the foreign market is small. We also show that the increase in R&D induced by parallel imports may even increase the consumer surplus of a country with high demand elasticities and which could face relatively low drug prices, if parallel imports were not allowed.

Keywords: Parallel Imports; Pharmaceutical Innovation; Drug Price Control (search for similar items in EconPapers)
JEL-codes: F13 I18 L65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino
Date: 2005-08, Revised 2005-08

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Persistent link: http://EconPapers.repec.org/RePEc:kgu:wpaper:26

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