External Price Benchmarking vs. Price Negotiation for Pharmaceuticals

Ackermann, Philipp (February 2010). External Price Benchmarking vs. Price Negotiation for Pharmaceuticals (Discussion Papers 10-04). Bern: Department of Economics

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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.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Ackermann, Philipp

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

08 Oct 2020 11:20

Last Modified:

08 Oct 2020 11:20

JEL Classification:

L65, I18

BORIS DOI:

10.7892/boris.145725

URI:

https://boris.unibe.ch/id/eprint/145725

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