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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
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http://hdl.handle.net/10419/46451
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| Title: | | Reference pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment  |
| Authors: | | Brekke, Kurt R. Holmås, Tor Helge Straume, Odd Rune |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper: Industrial Organisation 3258 |
| Abstract: | | We study the impact of regulation on competition between brand-names and generics and pharmaceutical expenditures using a unique policy experiment in Norway, where reference pricing (RP) replaced price cap regulation in 2003 for a sub-sample of off-patent products. First, we construct a vertical differentiation model to analyze the impact of regulation on prices and market shares of brand-names and generics. Then, we exploit a detailed panel data set at product level covering several off-patent molecules before and after the policy reform. Off-patent drugs not subject to RP serve as our control group. We find that RP significantly reduces both brand-name and generic prices, and results in significantly lower brand-name market shares. Finally, we show that RP has a strong negative effect on average molecule prices, suggesting significant cost-savings, and that patients' copayments decrease despite the extra surcharges under RP. |
| Subjects: | | pharmaceuticals regulation generic competition |
| JEL: | | I11 I18 L13 L65 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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