Pricing and Welfare of Parallel Imports in the Pharmaceutical Industry

Catalina Bordoy and Izabela Jelovac

No 4, Research Memorandum from Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT)

Abstract: In this paper we investigate the implications of permitting parallel imports ofpharmaceuticals produced by a monopoly, from one country to another. We use a modelwhere countries differ in the patients’ level of co-payment for buying pharmaceuticals, andpatients differ in the utility obtained from the consumption of pharmaceuticals. We show thatthe effects of parallel imports on total welfare are as follows: On the one hand, whencountries differ in their health system only, parallel imports decrease total welfare; On theother hand, when countries differ in the health needs of their patients only, parallel importsenhance total welfare.

Keywords: international economics and trade (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (1)

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