Price effects of competition from parallel imports and therapeutic alternatives for patent protected pharmaceuticals
Sweden has comparatively low prices for prescription pharmaceuticals with generic competition, but prices for on-patent prescription pharmaceuticals are higher in Sweden than the average for 20 European countries. It is therefore important to study how the competition that affects patent-protected pharmaceuticals s works and from the empirical results draw conclusions about what measures can be taken to push these prices down.
The purpose of this research project is to study how prices are affected by competition from parallel imported products and therapeutic alternatives. Parallel imported products are medicines that the original manufacturers sold to other EU / ESS countries and as parallel importers, without the manufacturers' permission, bought up and sold in a country where prices are higher. Therapeutic alternatives are other pharmaceutical substances intended for the same or similar medical diagnoses.
This project examines how the prices of pharmaceuticals sold directly to the Swedish market are affected by the number of companies that import the pharmaceutical in parallel from other EU/ESS countries and by the number of therapeutic alternatives. The Swedish pharmaceutical market offers exceptionally good opportunities to study price competition. The market rules in combination with access to data on a monthly level make it possible to in dynamic models use the number of competitors the previous month as an instrument for identifying the causal effect of the number of competitors this month. This makes it possible to contribute to the previous literature by:
a) estimating the impact of the number of competitors without bias and with less error margin than previous studies; b) studying the competition scope by analysing how competition from parallel imported products in exchange groups differs from competition from products containing the same substance but of a different strength, administrative form or packaging size; c) studying how quickly prices adjust to new equilibrium; and d) flexibly study the price-effect of another competitor depends on the existing number of competitors. We also intend to make a contribution by: e) calculating how society's costs have been affected by the pharmaceutical companies' right to grant pharmacies discounts on proprietary medicines from July 2009.
In addition to contributing with general knowledge that is of importance for states' choice of policy regarding mergers and market rules, the research can be used to determine which regulatory changes should be taken to reduce pharmaceutical prices, for example if the pharmaceutical companies' opportunities to give discounts to pharmacies should be abolished. In addition, research can enable better forecasts of pharmaceutical costs and more accurate evaluations of market reforms.