Paper #1322

Title:

Launching prices for new pharmaceuticals in heavily regulated and subsidized markets

Authors:

Jaume Puig and Beatriz González López-Valcárcel

Date:

May 2012

Abstract:

This paper provides empirical evidence on the explanatory factors affecting introductory prices of new pharmaceuticals in a heavily regulated and highly subsidized market. We collect a data set consisting of all new chemical entities launched in Spain between 1997 and 2005, and model launching prices. We found that, unlike in the US and Sweden, therapeutically "innovative" products are not overpriced relative to "imitative" ones. Price setting is mainly used as a mechanism to adjust for inflation independently of the degree of innovation. The drugs that enter through the centralized EMA approval procedure are overpriced, which may be a consequence of market globalization and international price setting.

Keywords:

pharmaceuticals; price competition; price regulation

JEL codes:

L11, L65, I10, I18

Area of Research:

Labour, Public, Development and Health Economics

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