The drug bargaining game: Pharmaceutical regulation in Australia, CHERE Discussion Paper No 51

Donald Wright

Discussion Papers from CHERE, University of Technology, Sydney

Abstract: Many countries, including Australia, regulate the price consumers pay for pharmaceuticals. In this paper, the Australian Pharmaceutical Benefits Scheme (PBS) is modelled as a multi-stage game played between the regulator and pharmaceutical firms. Conditions are derived under which vertically differentiated firms are regulated and a number of issues are discussed. These include efficiency, regulated firm profitability, leakage, and price discrimination. An extension examines the introduction of new drugs and concludes that if all the benefits of a new drug are to be realised, then existing agreements and transfers (per-unit subsidies) need to be renegotiated.

Keywords: Pharmaceuticals; Australia (search for similar items in EconPapers)
JEL-codes: I11 (search for similar items in EconPapers)
Date: 2002-12
New Economics Papers: this item is included in nep-hea and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:her:chedps:51

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