The Welfare Impact of Parallel Imports: A Structural Approach Applied to the German Market for Oral Anti‐diabetics

Duso, Tomaso; Herr, Annika; Suppliet, Moritz

doi:10.1002/hec.3068

Cited by 35 publications

(34 citation statements)

References 45 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…With respect to price reductions in the destination country, the results of this paper are mainly in line with the findings of West and Mahon (2003), Enemark et al (2006), Granlund andK€ oksal (2011), andDuso et al (2014). Kanavos et al (2004), Kanavos and Vandoros (2010), and Vandoros and Kanavos (2014) however, find an upward price convergence.…”

Section: Discussionsupporting

confidence: 90%

See 1 more Smart Citation

Pharmaceutical cost‐sharing systems and savings for healthcare systems from parallel trade

Birg

2018

World Economy

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper analyzes the consequences of parallel trade on health care systems in a two-country model with a vertical distributor relationship. In particular, two cost-sharing systems -coinsurance and indemnity insurance -are compared with respect to changes in copayments and public health expenditure. Under both cost-sharing systems, parallel trade generates a price-decreasing competition e¤ect in the destination country and a priceincreasing double marginalization e¤ect in the source country. In the destination country, copayments for patients decrease to a larger extent under indemnity insurance, whereas reductions of public health expenditure occur only under coinsurance. In the source country, copayments increase less under coinsurance, whereas health expenditure is reduced more under indemnity insurance. This illustrates that a harmonization of health care systems would not make sense. Terms of use: Documents in EconStor mayJEL classi…cation: F12, I11, I18

show abstract

Section: Discussionsupporting

confidence: 90%

“…In the destination country, parallel trade generates a competition effect with lower drug prices and a higher quantity. A competition effect with price reductions is in line with the findings of West and Mahon (2003), Enemark et al (2006), Granlund andK€ oksal (2011), andDuso et al (2014).…”

Section: The Effect Of Parallel Trade On Healthcare Systemssupporting

confidence: 87%

Pharmaceutical cost‐sharing systems and savings for healthcare systems from parallel trade

Birg

2018

World Economy

View full text Add to dashboard Cite

show abstract

“…Moreover, the presence of parallel trade often lowers the incentive of the manufacturer for product innovation [28]. In [14], this has been confirmed empirically (referring to the case of the German market of oral anti-diabetics) through a structural approach, by comparing a counterfactual scenario with the status quo market.…”

Section: Related Literaturementioning

confidence: 82%

“…13 Originally proposed in [26] under the name of "coordination ratio"; nowadays, the term "price of anarchy" is more common [27]. 14 When the ratio in the definition of the price of anarchy has the indeterminate form 0 0 , by convention (and uniformity with respect to the other non-indeterminate cases), we assign to it the value 1, as the numerator and the denominator are equal. price of anarchy coincide, due to Propositions 4.1 and 4.2.…”

Section: A Decision Theoretic Model and Five Game-theoretic Models Fmentioning

confidence: 99%

A Comparison of Game-Theoretic Models for Parallel Trade

Gnecco

Tuncay

Pammolli

2018

Int. Game Theory Rev.

View full text Add to dashboard Cite

Within the EU Single Market for medicines, differences in drug prices, regulations, and transaction costs may create, under suitable conditions, arbitrage opportunities well before patent expiration, giving an incentive to the occurrence of parallel trade. When this is permitted, parallel traders may obtain a profit from buying drugs in a country where prices are lower, then re-selling them in a country where prices are higher. This phenomenon may cause inefficiencies from a global welfare perspective, and reduce the manufacturers' incentive to invest in Research and Development (R & D). Given this framework, in this paper, we investigate the efficiency (expressed in terms of the price of anarchy) of the subgame-perfect Nash equilibria associated with five dynamic noncooperative game-theoretic models for the parallel trade of pharmaceuticals. We also compare such models with regard to the manufacturer's incentive to invest in R & D. More specifically, first we find in closed form the optimal value of the global welfare of two countries, which is obtained by solving a suitable quadratic optimization problem modeling the decision-making process of a global planner. Then, we use such a result to evaluate and compare the prices of anarchy of five games modeling the interaction between a manufacturer in the first country and a potential parallel trader in the second country. The first three games refer, respectively, to the cases of no parallel trade threat, parallel trade threat, and parallel trade occurrence at equilibrium. Then, we investigate two modifications of the third game, in which its transfer payment from the potential parallel trader to the manufacturer is, respectively, removed/determined by Nash bargaining. For completeness, we also consider a decision-theoretic model of no parallel trade threat. For what concerns the incentive for the manufacturer to invest in R & D, the results of our numerical comparison show that the decision-theoretic model of no parallel trade threat is always the one with the highest incentive, whereas the two game-theoretic models of parallel trade threat/occurrence that do not include the transfer payment provide typically the smallest incentives. Moreover, the latter two models have the largest prices of anarchy (i.e., their equilibria have the smallest efficiencies). From a policy-making perspective, improvements are obtained if suitable countermeasures are taken to help the manufacturer recover from the costs of R & D, such as the inclusion of a transfer payment in the model. Keywords Economic applications of operations research · global welfare optimization · noncooperative game theory · subgame-perfect Nash equilibrium · numerical comparison of efficiency · incentive to invest in Research and Development

show abstract

“…Finally, in a contemporaneous paper, Duso, Herr, and Suppliet () examine the welfare effects of parallel trade using data on the German market for oral antidiabetic drugs. Their results suggest a decrease in prices for on‐patent products of 11%, no effects for generics, and a modest impact on consumer surplus.…”

Section: Literature Reviewmentioning

confidence: 99%

Parallel trade of pharmaceuticals: The Danish market for statins

Méndez

2017

Health Economics

View full text Add to dashboard Cite

This paper investigates and quantifies the impact of parallel trade in markets for pharmaceuticals. The paper develops a structural model of demand and supply using data on price, sales, and the characteristics of statins in Denmark and simulates outcomes under a complete ban of parallel imports, keeping other regulatory schemes unchanged. There are two sets of key results. The first set focuses on price effects. On average, prices increase more in markets where the molecule has lost patent protection; wholesale prices for both generic and original products increase after competition from parallel importers is removed, but the final price paid by consumers (after deducting reimbursement) increases more for original products than for generics because most changes in wholesale prices are absorbed by the prevailing reimbursement rules. The second set of results reports the effects on market participants. My model takes into consideration consumers' preferences, allowing them to substitute between products. Prohibiting parallel imports induces consumers to substitute towards original products for which they have stronger preferences. In sum, banning parallel imports leads to (a) an increase in variable profits for original producers and a decrease for generic firms, (b) an increase in governmental health-care expenditures, and (c) a decrease in the welfare of Danish patients and firms.

show abstract

The Welfare Impact of Parallel Imports: A Structural Approach Applied to the German Market for Oral Anti‐diabetics

Cited by 35 publications

References 45 publications

Pharmaceutical cost‐sharing systems and savings for healthcare systems from parallel trade

Pharmaceutical cost‐sharing systems and savings for healthcare systems from parallel trade

A Comparison of Game-Theoretic Models for Parallel Trade

Parallel trade of pharmaceuticals: The Danish market for statins

Contact Info

Product

Resources

About