Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/63092
Authors: 
Dalen, Dag Morten
Strøm, Steinar
Haabeth, Tonje
Year of Publication: 
2005
Series/Report no.: 
Memorandum, Department of Economics, University of Oslo 2005,33
Abstract: 
In March 2003 the Norwegian government implemented yardstick based price regulation schemes on a selection of drugs experiencing generic competition. The retail price cap, termed “index price”, on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998-2004 for the 6 drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.
Subjects: 
Discrete choice
demand for pharmaceuticals
monopolistic competition
evaluation of yardstick based price regulation
JEL: 
C35
D43
I18
L11
Document Type: 
Working Paper

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