EconPapers    
Economics at your fingertips  
 

Does Regulation Drive out Competition in Pharmaceutical Markets?

Patricia Danzon and Li-Wei Chao

Journal of Law and Economics, 2000, vol. 43, issue 2, 311-57

Abstract: Most countries regulate pharmaceutical prices, either directly or indirectly, on the assumption that competition is at best weak in this industry. This paper tests the hypothesis that regulation of manufacturer prices and retail pharmacy margins undermines price competition. We use data from seven countries for 1992 to examine price competition between generic competitors (different manufacturers of the same compound) and therapeutic substitutes (similar compounds) under different regulatory regimes. We find that price competition between generic competitors is significant in unregulated or less regulated markets (United States, United Kingdom, Canada, and Germany) but that regulation undermines generic competition in strict regulatory systems (France, Italy, and Japan). Regulation of retail pharmacy further constrains competition in France, Germany, and Italy. Regulation thus undermines the potential for significant savings on off-patent drugs, which account for a large and growing share of drug expenditures. Evidence of competition between therapeutic substitutes is less conclusive owing to data limitations. Copyright 2000 by the University of Chicago.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (91) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/467458 (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
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:ucp:jlawec:v:43:y:2000:i:2:p:311-57

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2021-08-31
Handle: RePEc:ucp:jlawec:v:43:y:2000:i:2:p:311-57