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Price regulation and generic competition in the pharmaceutical market
By Dalen, D.M., T. Haabeth og S. Strøm
HERO Working Paper 1/2006
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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. |
| JEL Classification:
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C35, D43, I18, L11 |
| Keywords:
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Discrete choice, demand for pharmaceuticals, monopolistic
competition, evaluation of yardstick based price regulation |
| ISBN:
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82-7756-162-08 |
| Project:
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4104 The market for Pharmaceuticals
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| Financing:
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Norges forskningsråd |
| Contact:
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steinar.strom@econ.uio.no |
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