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Price regulation and generic competition in the
pharmaceutical market
By Dalen, Dag Morten Dalen, Tonje Haabeth and Steinar Strøm
2006
The European Journal of Health Economics, No. 3
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Abstract |
In March 2003 the Norwegian government
implemented yardstick-based price regulation
schemes on a selection of drugs subjected
to generic competition. The retail
price cap, termed the “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 six 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. |
| Keywords:
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Discrete choice · Demand for pharmaceuticals
· Monopolistic competition · Evaluation
of yardstick-based price regulation |
| Project:
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4104 The market for Pharmaceuticals
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| Financing:
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Norwegian Research Council |
| Contact:
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dag.m.dalen@bi.no |
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