 The relationship of drug reimbursement with the price and the quality of pharmaceutical innovationsM. D. C. García-Alonso and B. G. Mariñoso Working Papers from Department of Economics, City St George's, University of London Abstract: This paper studies the strategic interaction between pharmaceutical firms' pricing decisions and government agencies' reimbursement decisions which discriminate between patients by giving reimbursement rights to patients for whom the drug is most effective. We show that if the reimbursement decision preceeds the pricing decision, the agency only reimburses some patients if the private and public health benefits from the new drug diverge. That is, when (i) there are large externalities of consuming the drug and (ii) the difference in costs between the new drug and the alternative treatment is large. Alternatively, if the firm can commit to a price in advance of the reimbursement decision, we identify a strategic effect which implies that by committing to a high price ex ante, the firm can force a listing outcome and make the agency more willing to reimburse than in the absence of commitment. Keywords: Pharmaceutical industry; innovation; health policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cty:dpaper:05/02 Access Statistics for this paper More papers in Working Papers from Department of Economics, City St George's, University of London Department of Economics, Social Sciences Building, City St George's, University of London, Whiskin Street, London, EC1R 0JD, United Kingdom. Contact information at EDIRC. |
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