Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88600
Authors: 
Birg, Laura
Year of Publication: 
2013
Series/Report no.: 
Discussion Papers, Center for European Governance and Economic Development Research 180
Abstract: 
This paper studies the effect of pharmaceutical regulation at the wholesale level, if markets are integrated by parallel trade, i.e. trade outside the manufacturer´s authorized distribution channel. In particular, maximum wholesale margins, a restriction of pricing by the intermediary, and mandatory rebates, a restriction of the pricing by the manufacturer, are analyzed with respect to their effect on drug prices, quantities, and public pharmaceutical expenditure. Maximum wholesale margins enhance the manufacturer´s ability to reduce competition from parallel trade in the destination country by increasing wholesale prices. In a symmetric equilibrium, maximum wholesale margins of both countries partly offset each other. Mandatory rebates may be a policy alternative, as they exhibit a reinforcing effect with respect to drug prices.
Subjects: 
parallel trade
regulation
maximum markups
spillovers
mandatory rebates
JEL: 
F12
I11
I18
Document Type: 
Working Paper

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