The Effect of Pharmacies’ Right to Negotiate Discounts on the Market Share of Parallel Imported Pharmaceuticals

Granlund David ()
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Granlund David: Department of Economics, Umeå University, SE-901 87 Umeå, Sweden

The B.E. Journal of Economic Analysis & Policy, 2015, vol. 15, issue 3, 1197-1235

Abstract: This paper analyzes how allowing pharmacies to negotiate discounts with parallel traders and producers affects the market share for parallel imports. Economic theory predicts that discount negotiations will promote products bought directly from the producers because producers have cost advantages, due to which they always underbid the marginal prices of parallel traders. A reform that allowed discount negotiations is found to reduce the market share for parallel imports by about 11 percentage points to reach 31%. The results clearly indicate that pharmacies have an important role in the choice between medically equivalent pharmaceuticals.

Keywords: drugs; incentives; margins; parallel imports; parallel trade; pharmacies (search for similar items in EconPapers)
JEL-codes: I11 I18 L13 L51 L65 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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DOI: 10.1515/bejeap-2014-0079

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