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Competition in prescription drug markets: is parallel trade the answer?
Author(s) -
Kanavos Panos,
Vandoros Sotiris
Publication year - 2010
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1486
Subject(s) - competition (biology) , convergence (economics) , economics , distribution (mathematics) , drug prices , panel data , limit price , industrial organization , microeconomics , international economics , price level , monetary economics , econometrics , macroeconomics , ecology , biology , mathematical analysis , mathematics
This article uses a price determination model with dynamic panel data estimation to examine the extent to which pharmaceutical parallel trade promotes price competition and leads to downward price convergence. Little evidence of sustainable price competition is found. We find that prices are mainly affected by regulation and by competition in the wholesale distribution chain; that the pricing strategy of parallel distributors resembles that of originator drugs in importing countries; and that there may be upward rather than downward price convergence. Drawing on the European evidence, the findings also indicate that opening the US market to parallel imports will not necessarily lead to competition and enhance pharmaceutical cost containment. Copyright © 2010 John Wiley & Sons, Ltd.