Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark

Arbeitspapier

Reference prices constitute a main determinant of patient health care reimbursement in many countries. We study the effects of a change from an external (based on a basket of prices in other countries) to an internal (based on comparable domestic products) reference price system. We find that while our estimated consumer compensating variation is small, the reform led to substantial reductions in list and reference prices as well as co-payments, and to sizeable decreases in overall producer revenues, health care expenditures, and co-payments. These effects differ markedly between branded drugs, generics, and parallel imports with health care expenditures and producer revenues decreasing and co-payments increasing most for branded drugs. The reform also induced consumers to substitute from branded drugs - for which they have strong preferences - to generics and parallel imports. This substitution also explains the small increase in consumer welfare despite a substantial decrease in expenditures.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 7248

Classification and Topics

• Classification: Wirtschaft ; Health: Government Policy; Regulation; Public Health ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
• Subject: pharmaceutical markets ; regulation ; co-payments ; reference pricing ; welfare effects

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kaiser, Ulrich ; Méndez, Susan J. ; Rønde, Thomas ; Ullrich, Hannes
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/71637
• Last update: 10.03.2025, 11:44 AM CET