Reforming the Swedish pharmaceuticals market: consequences for costs per defined daily dose
In 2009 and 2010, the Swedish pharmaceuticals market was reformed. One of the stated policy goals was to achieve low costs for pharmaceutical products dispensed in Sweden. We use price and sales data for off-patent brand-name and generic pharmaceuticals to estimate a log-linear regression model, allowing us to assess how the policy changes affected the cost per defined daily dose. The estimated effect is an 18 % cost reduction per defined daily dose at the retail level and a 34 % reduction in the prices at the wholesale level (pharmacies’ purchase prices). The empirical results suggest that the cost reductions were caused by the introduction of a price cap, an obligation to dispense the lowest-cost generic substitute available in the whole Swedish market, and the introduction of well-defined exchange groups. The reforms thus reduced the cost per defined daily dose for consumers while being advantageous also for the pharmacies, who saw their retail margins increase. However, pharmaceutical firms supplying off-patent pharmaceuticals experienced a clear reduction in the price received for their products.
KeywordsPharmaceutical industry National pharmacy monopoly Pharmacy deregulation Competition Generics Pricing
JEL ClassificationD80 D83 L65 I11
Financial support from the Swedish Competition Authority is gratefully acknowledged. We are also grateful to IMS Sweden and Tillväxtanalys for supplying the data used in this paper. The authors declare that the founding source had no role in the development of the article.
Compliance with ethical standards
Conflicts of Interest
The authors declare that they do not have any conflicts of interest that are relevant to the content of the article.
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