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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26104
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| Title: | | Regulation and pricing of pharmaceuticals: reference pricing or price cap regulation?  |
| Authors: | | Brekke, Kurt R. Grasdal, Astrid L. Holmås, Tor Helge |
| Issue Date: | | 2007 |
| Series/Report no.: | | CESifo working paper 2059 |
| Abstract: | | We study the relationship between regulatory regimes and pharmaceutical firms pricing strategies using a unique policy experiment from Norway, which in 2003 introduced a reference price (RP) system called index pricing for a sub-sample of off-patent pharmaceuticals, replacing the existing price cap (PC) regulation. We estimate the effect of the reform using a product level panel dataset, covering the drugs exposed to RP and a large number of drugs still under PC regulation in the time before and after the policy change. Our results show that RP significantly reduces both brand-name and generic prices within the reference group, with the effect being stronger for brand-names. We also identify a negative cross-price effect on therapeutic substitutes not included in the RP-system. In terms of policy implications, the results suggest that RP is more effective than PC regulation in lowering drug prices, while the cross-price effect raises a concern about patent protection. |
| JEL: | | I11 L13 L51 L65 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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