Pharmaceutical Pricing in a Regulated Market

Mats Ekelund and Björn Persson
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Mats Ekelund: Stockholm School of Economics
Björn Persson: Stockholm School of Economics

The Review of Economics and Statistics, 2003, vol. 85, issue 2, 298-306

Abstract: We compare how new pharmaceuticals are priced in the price-regulated Swedish market with how they are priced in the U.S. market, as studied by Lu and Comanor (1998). We collect a data set consisting of all new chemical entities (NCEs) launched in Sweden between 1987 and 1997, and test the same models as Lu and Comanor. In line with their results, we find that introductory prices depend on the degree of therapeutic innovation. Contrary to the results from the U.S. market, Swedish real prices for NCEs fall substantially over time for all classes of therapeutic innovation. Also contrary to the findings of Lu and Comanor, we find no effect of the presence of branded substitutes on either introduction prices or price dynamics. Our results indicate that the price regulation discourages price competition between brandname drugs. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2003
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