Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76752
Authors: 
Ackermann, Philipp
Year of Publication: 
2010
Series/Report no.: 
Discussion Papers, Department of Economics, Universität Bern 10-04
Abstract: 
External price benchmarking imposes a price cap for pharmaceuticals based on prices of identical products in other countries. Suppose that a regulatory agency can either directly negotiate drug prices with pharmaceutical manufacturers or implement a benchmarking regime based on foreign prices. Using a model where two countries differ only in their market size, we show that a country prefers benchmarking if its agency has considerably less bargaining power compared to the agency in the other country. Assuming that bargaining power is positively correlated to country size, we find that only small countries might have an incentive to engage in external price benchmarking. This incentive shrinks if population size grows.
Subjects: 
pharmaceuticals
price negotiation
administered prices
external reference pricing
JEL: 
L65
I18
Document Type: 
Working Paper

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