TY - JOUR
T1 - "Retail Price Regulation and Innovation: Reference Pricing in the Pharmaceutical Industry"
AU - Garcia Suaza, Andres Felipe
AU - Bardey, David
AU - Jullien, Bruno
AU - Bommier, A
PY - 2010/3
Y1 - 2010/3
N2 - Our paper is a first attempt to evaluate the long run impact of reference pricing on pharmaceutical innovation, health and expenditures. The model is based on a dynamic game involving three types of agents: pharmaceutical firms, consumers and a regulatory entity. Pharmaceutical firms choose the level of research investment and its innovative content, then negotiate introductory prices for new drugs with the regulator. Reference pricing affects negatively the intensity of research and it also modifies the types of innovations that are brought to the market, deterring small innovations. The model is calibrated with a small data on statins in France. Our results suggest that reference pricing typically generates a decline in health, whereas discounted expenditures may decrease or increase, depending on the degree of deterrence of cost reducing innovations.
AB - Our paper is a first attempt to evaluate the long run impact of reference pricing on pharmaceutical innovation, health and expenditures. The model is based on a dynamic game involving three types of agents: pharmaceutical firms, consumers and a regulatory entity. Pharmaceutical firms choose the level of research investment and its innovative content, then negotiate introductory prices for new drugs with the regulator. Reference pricing affects negatively the intensity of research and it also modifies the types of innovations that are brought to the market, deterring small innovations. The model is calibrated with a small data on statins in France. Our results suggest that reference pricing typically generates a decline in health, whereas discounted expenditures may decrease or increase, depending on the degree of deterrence of cost reducing innovations.
U2 - https://doi.org/10.1016/j.jhealeco.2 009.11.015
DO - https://doi.org/10.1016/j.jhealeco.2 009.11.015
M3 - Research Article
SN - 0167-6296
VL - 29
SP - 303
EP - 316
JO - Journal of Health Economics
JF - Journal of Health Economics
IS - 2
ER -