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Externalities of Wholesale Level Regulation under Pharmaceutical Parallel Trade

Laura Birg

Economics Bulletin, 2017, vol. 37, issue 3, 2260-2273

Abstract: This paper studies the effect of pharmaceutical regulation at the wholesale level under parallel trade, i.e. trade outside the manufacturer's authorized distribution channel. In a symmetric equilibrium, both maximum wholesale margins (restriction of pricing by the intermediary) and manufacturer discounts (restriction of the pricing by the manufacturer) decrease the drug price in the respective country. Instruments differ in their effect on the other country: Whereas maximum wholesale margins increase the drug price in the other country, manufacturer discounts may decrease it.

Keywords: parallel trade; pharmaceutical regulation; externalities (search for similar items in EconPapers)
JEL-codes: F1 I1 (search for similar items in EconPapers)
Date: 2017-09-27
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