On the welfare analysis of external reference pricing and reimbur-sement policy

Dong Van-Chung, Yan-Shu Lin and Pei-Cyuan Shih ()

Estudios de Economia, 2023, vol. 50, issue 1 Year 2023, 133-158

Abstract: The co-existence of external referencing pricing (ERP) and reimbursement policy is common in many countries. Thus, this research examines whether or not the imposition of ERP is socially desirable in the presence of reimbursement policy. For direct sales channel, we find that the home social welfare is worse-off with ERP if the home copayment rate is too high. Our main results are robust under indirect sales channel. Moreover, the home social welfare under the pharmacy-purchasing-price (PPP) ERP is larger than that under the ex-factory-price (EFP) ERP if the home copayment rate is high enough. Finally, the profit of brand-name firm under indirect sales channel is higher than that under direct sales channel if the home copayment rate is too high.

Keywords: Copayment rate; direct and indirect sales channeles; external refe-rence pricing; reimbursement policy. (search for similar items in EconPapers)
JEL-codes: D42 F10 I11 I18 (search for similar items in EconPapers)
Date: 2023
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