Price regulation and parallel imports of pharmaceuticals

Kurt Brekke (), Tor Helge Holmås and Odd Rune Straume

Journal of Public Economics, 2015, vol. 129, issue C, 92-105

Abstract: This paper studies the effects of price regulation and parallel imports in the on-patent pharmaceutical market. In a theory model where the producer price is subject to bargaining between the brand-name producer and a distributor, we show that the effects of stricter price regulation crucially depend on whether the producer faces competition from parallel imports. While parallel imports improve the bargaining position of the distributor, price regulation counteracts this effect and may even be profitable for the producer. We test the implications of our model on a unique dataset with information on sales and prices at both producer and retail level for 165 substances over 4years (2004–2007). We show that stricter price regulation reduces competition from parallel imports, and has no (strictly negative) effect on producer profits in the presence (absence) of parallel imports. Our results suggest that price regulation might improve static efficiency without being harmful for dynamic efficiency in the presence of parallel imports.

Keywords: Pharmaceutical market; Price regulation; Parallel imports (search for similar items in EconPapers)
JEL-codes: I11 I18 L13 L51 L65 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Price Regulation and Parallel Imports of Pharmaceuticals (2015)
Working Paper: Price Regulation and Parallel Imports of Pharmaceuticals (2014)
Working Paper: Price Regulation and Parallel Imports of Pharmaceuticals (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:129:y:2015:i:c:p:92-105

DOI: 10.1016/j.jpubeco.2015.08.002

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