On international cost-sharing of pharmaceutical R&D

Article

Abstract

Ramsey pricing has been proposed in the pharmaceutical industry as a principle to price discriminate among markets while allowing to recover the (fixed) R&D cost. However, such analyses neglect the presence of insurance or the fund raising costs for most of drug reimbursement. By incorporating these new elements, we aim at providing some building blocks towards an economic theory incorporating Ramsey pricing and insurance coverage. We show how coinsurance affects the optimal prices to pay for the R&D investment. We also show that under certain conditions, there is no strategic incentive by governments to set coinsurance rates in order to shift the financial burden of R&D. This will have important implications to the application of Ramsey pricing principles to pharmaceutical products across countries.

Keywords

Ramsey pricing Coinsurance 

JEL Classifications

I11 I18 L51 

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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Faculdade de EconomiaUniversidade Nova de LisboaLisboaPortugal
  2. 2.CODE and Departament d’EconomiaUniversitat Autònoma de BarcelonaBellaterraSpain

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