Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/194355 
Authors: 
Year of Publication: 
2019
Series/Report no.: 
cege Discussion Papers No. 253
Version Description: 
Revised Version March 2019
Publisher: 
University of Göttingen, Center for European, Governance and Economic Development Research (cege), Göttingen
Abstract: 
In this paper, I study the effect of parallel trade (cross border resale of goods without the authorization of the manufacturer) on pharmaceutical regulation in a North-South framework with a firm's endogenous decision to export to the South. Governments in both countries may limit prices directly via price caps or restrict third-party payer reimbursement for the drug via reimbursement limits. Parallel trade may relax regulation in the source country of parallel imports (South) and intensify regulation in the destination country (North): In the source country, parallel trade may relax regulation both under a price cap and a reimbursement limit under certain conditions. In the destination country, parallel trade has no effect on the level of regulation under a price cap, and it intensifies regulation under a reimbursement limit. Parallel trade may change regulatory preferences: Under no parallel trade, both the source and destination country set prices caps. Under parallel trade, the source country sets a price cap, but the destination country sets a reimbursement, thereby enforcing a higher price cap in the South. This implies higher drug prices under parallel trade in both source and destination country.
Subjects: 
pharmaceutical regulation
price cap
reimbursement limit
parallel trade
JEL: 
F12
I11
I18
Document Type: 
Working Paper

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