The impact of the reference price system on the pharmaceutical market: A theoretical approach

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• dc.contributor.author Merino, Annaca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:50:10Z
• dc.date.available 2017-07-26T10:50:10Z
• dc.date.issued 2000-12-01
• dc.date.modified 2017-07-23T02:05:55Z
• dc.description.abstract This article analyses the impact of the reference price system on the price-setting strategies of the pharmaceutical firms and on the level of generic usage. This model is the first to take explicitly into account the impact of the reference price mechanism on the level of competition between brand-name and generic drugs and national pharmaceutical spending. We consider a duopolistic model with one firm producing the brand-name drug, whose patent has already expired, and the other producing the corresponding generic version. We work in a partial equilibrium framework where firms set prices sequentially and consumers face heterogeneous switching costs.We show that brand producers compensate the decline of profits by selling greater quantities instead of charging higher prices, thus fostering price competition in the pharmaceutical market. This result is a consequence of both the assumption of a vertically differentiated model and the introduction of the reference price system.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=524
• dc.identifier.uri http://hdl.handle.net/10230/409
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 524
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword brand-name and generic drugs
• dc.subject.keyword pricing mechanismand switching costs
• dc.subject.keyword Labour, Public, Development and Health Economics
• dc.title The impact of the reference price system on the pharmaceutical market: A theoretical approachca
• dc.type info:eu-repo/semantics/workingPaper