Drug innovation, price controls, and parallel trade
Tóm tắt
We study the long-run welfare effects of parallel trade (PT) in pharmaceuticals. We develop a two-country model of PT with endogenous quality, where the pharmaceutical firm negotiates the price of the drug with the government in the foreign country. We show that, even though the foreign government does not consider global R&D costs, (the threat of) PT improves the quality of the drug as long as the foreign consumers’ valuation of quality is high enough. We find that the firm’s short-run profit may be higher when PT is allowed. Nonetheless, this is neither necessary nor sufficient for improving drug quality in the long run. We also show that improving drug quality is a sufficient condition for PT to increase global welfare. Finally, we show that, when PT is allowed, drug quality may be higher with than without price controls.
Tài liệu tham khảo
Kanavos, P., & Costa-Font, J. (2005). Pharmaceutical parallel trade in Europe: Stakeholder and competition effects. Economic Policy, 20, 751–798.
Pigou, A. C. (1920). The economics of welfare. London: Macmillan.
Rey, P. (2003). The impact of parallel imports on prescription medicines. Toulouse: Mimeo, IDEI, University of Toulouse.