External price benchmarking vs. price negotiation for pharmaceuticals

Arbeitspapier

External price benchmarking imposes a price cap for pharmaceuticals based on prices of identical products in other countries. Suppose that a regulatory agency can either directly negotiate drug prices with pharmaceutical manufacturers or implement a benchmarking regime based on foreign prices. Using a model where two countries differ only in their market size, we show that a country prefers benchmarking if its agency has considerably less bargaining power compared to the agency in the other country. Assuming that bargaining power is positively correlated to country size, we find that only small countries might have an incentive to engage in external price benchmarking. This incentive shrinks if population size grows.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Papers ; No. 10-04

Classification and Topics

• Classification: Wirtschaft ; Chemicals; Rubber; Drugs; Biotechnology; Plastics ; Health: Government Policy; Regulation; Public Health
• Subject: pharmaceuticals ; price negotiation ; administered prices ; external reference pricing ; Pharmazeutisches Produkt ; Preisregulierung ; Zwei-Länder-Modell ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ackermann, Philipp
• Event: Veröffentlichung
• (who): University of Bern, Department of Economics
• (where): Bern
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/76752
• Last update: 10.03.2025, 11:41 AM CET