Reference pricing systems on the pharmaceutical market

Maximiliane Unsorg

German Economic Review, 2022, vol. 23, issue 3, 403-421

Abstract: Constantly rising expenditures for pharmaceuticals require government intervention in firms’ pricing decisions. To this end, reference pricing systems are a frequently employed regulatory mechanism. This paper considers a duopoly market with vertically differentiated firms highlighting the effects of a reference pricing system on prices, consumer and producer surplus, expenditures and welfare. Reference pricing decreases equilibrium prices and induces a more competitive environment. It promotes generic usage leading to increased market coverage. Especially generic consumers benefit from a reference pricing regulation. The losses in producer surplus are mainly born by the brand-name firm. Introducing a reference pricing system unambiguously increases welfare.

Keywords: reference pricing; pharmaceutical market; copayment; price cap; price competition; expenditures; consumer surplus (search for similar items in EconPapers)
JEL-codes: I11 I18 L51 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/ger-2020-0105 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Reference pricing systems on the pharmaceutical market (2018)
Working Paper: Reference Pricing Systems on the Pharmaceutical Market (2018)
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: https://EconPapers.repec.org/RePEc:bpj:germec:v:23:y:2022:i:3:p:403-421:n:3

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/ger/html

DOI: 10.1515/ger-2020-0105

Access Statistics for this article

German Economic Review is currently edited by Peter Egger, Almut Balleer, Jesus Crespo-Cuaresma, Mario Larch, Aderonke Osikominu and Georg Wamser

More articles in German Economic Review from De Gruyter
Bibliographic data for series maintained by Peter Golla ().