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Price competition in pharmaceuticals: evidence from 1303 Swedish markets
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.ORCID iD: 0000-0003-4467-8676
2018 (English)In: Journal of Health Economics, ISSN 0167-6296, E-ISSN 1879-1646, Vol. 61, p. 1-12Article in journal (Refereed) Published
Abstract [en]

We study the short- and long-term price effects of the number of competing firms, using panel-data on 1303 distinct pharmaceutical markets for 78 months within a reference-price system. We use actual transaction prices in an institutional setting with little scope for non-price competition and where simultaneity problems can be addressed effectively. In the long term, the price of generics is found to decrease by 81% when the number of firms selling generics with the same strength, form and similar package size is increased from 1 to 10. Nearly only competition at this fine-grained level matters; the effect of firms selling other products with the same active substance, but with different package size, form, or strength, is only a tenths as large. Half of the price reductions take place immediately and 70% within three months. Also, prices of originals are found to react to competition, but far less and much slower.

Place, publisher, year, edition, pages
Elsevier, 2018. Vol. 61, p. 1-12
Keywords [en]
Price competition, Dynamic, Adjustment, Pharmaceutical industry, Generic drugs, Brand-name drugs, Reference price, Generic substitution
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-150413DOI: 10.1016/j.jhealeco.2018.06.009ISI: 000447106100001PubMedID: 30007260Scopus ID: 2-s2.0-8504975557OAI: oai:DiVA.org:umu-150413DiVA, id: diva2:1236993
Funder
Swedish Competition Authority, 395/2015Available from: 2018-08-07 Created: 2018-08-07 Last updated: 2018-12-13Bibliographically approved

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The full text will be freely available from 2020-08-03 09:23
Available from 2020-08-03 09:23

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Granlund, David

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CiteExportLink to record
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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf