Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71637
Authors: 
Kaiser, Ulrich
Méndez, Susan J.
Rønde, Thomas
Ullrich, Hannes
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7248
Abstract: 
Reference prices constitute a main determinant of patient health care reimbursement in many countries. We study the effects of a change from an external (based on a basket of prices in other countries) to an internal (based on comparable domestic products) reference price system. We find that while our estimated consumer compensating variation is small, the reform led to substantial reductions in list and reference prices as well as co-payments, and to sizeable decreases in overall producer revenues, health care expenditures, and co-payments. These effects differ markedly between branded drugs, generics, and parallel imports with health care expenditures and producer revenues decreasing and co-payments increasing most for branded drugs. The reform also induced consumers to substitute from branded drugs - for which they have strong preferences - to generics and parallel imports. This substitution also explains the small increase in consumer welfare despite a substantial decrease in expenditures.
Subjects: 
pharmaceutical markets
regulation
co-payments
reference pricing
welfare effects
JEL: 
I18
C23
Document Type: 
Working Paper

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