EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals: Has the Price Competition increased?

Granlund David () and Köksal-Ayhan Miyase Yesim ()
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Granlund David: Department of Economics, Umeå University, SE-901 87 Umeå, Sweden
Köksal-Ayhan Miyase Yesim: Department of Economics, School of Business, Economics and Law, University of Gothenburg, SE-405 30 Gothenburg, Sweden

The B.E. Journal of Economic Analysis & Policy, 2016, vol. 16, issue 2, 1069-1092

Abstract: Given the cost of trade and availability of pharmaceuticals, the driving force for parallel trade is the price difference between the source (exporting) and the destination (importing) country. An increase in the price difference or in the availability of pharmaceuticals for parallel trade should increase price competition in the destination country. Using 2003–2007 data from Sweden we investigated whether EU enlargement in 2004, when new countries with low pharmaceutical prices joined the EU, increased competition from parallel imports. Drugs facing competition from parallel imports are found to have on average 19–22% lower prices than they would have had if they had never faced such competition. The EU enlargement is, however, not found to have increased this effect, which might be explained by derogations and changes in consumer perceptions of parallel imports.

Keywords: EU enlargement; parallel trade; pharmaceuticals; price competition (search for similar items in EconPapers)
JEL-codes: I11 L51 L65 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/bejeap-2015-0127

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