External Referencing and Pharmaceutical Price Negotiation

GATE Workin Paper No. 08-15

40 Pages Posted: 22 Jul 2008 Last revised: 15 Apr 2011

See all articles by Begoña Mariñoso

Begoña Mariñoso

Comisión del Mercado de las Telecomunicaciones (CMT)

Izabela Jelovac

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Pau Olivella

Autonomous University of Barcelona - Department of Business Administration; International Health Economics Association (iHEA)

Date Written: May 1, 2008

Abstract

External referencing (ER) imposes a price cap for pharmaceuticals based on prices of identical products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm while a home country (H) can either negotiate independently or implement ER based on the foreign price. We show that country H always prefers ER if (i) it can condition ER on the drug being subsidized in the foreign country and (ii) copayments are higher in H than in F. H's preference is reinforced when the difference between country copayments is large and/or H's population is small. External referencing by H always harms F if (ii) holds, but less so if (i) holds.

Keywords: pharmaceuticals, external referencing, price negotiation

JEL Classification: L65, I18

Suggested Citation

Mariñoso, Begoña and Jelovac, Izabela and Olivella, Pau, External Referencing and Pharmaceutical Price Negotiation (May 1, 2008). GATE Workin Paper No. 08-15, Available at SSRN: https://ssrn.com/abstract=1168822 or http://dx.doi.org/10.2139/ssrn.1168822

Begoña Mariñoso (Contact Author)

Comisión del Mercado de las Telecomunicaciones (CMT) ( email )

Carrer de la Marina 16-18
Barcelona, 08005
Spain

Izabela Jelovac

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France

Pau Olivella

Autonomous University of Barcelona - Department of Business Administration ( email )

Campus Bellaterra Edifici B.
Bellaterra (Barcelona), 08193
Spain
3493-581 2369 (Phone)
3493-581 24 61 (Fax)

International Health Economics Association (iHEA) ( email )

435 East Durham Street
Philadelphia, PA 19119
United States

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
118
Abstract Views
1,052
rank
316,968
PlumX Metrics