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Price competition in the chinese pharmaceutical market

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Abstract

We study price competition between high-quality global products and low-quality local products in a developing country, i.e., China, Nearly all previous studies on pharmaceutical price competition focused on developed countries with bioequivalent generics. In China, local generic products are not bioequivalent and are deemed of lower quality, while global products in the same class are considered similar in quality and better substitutes. We hypothesize that local generic competition drives down local product price but not global product price. In addition, we hypothesize that therapeutic competition among similar global products lowers global product price. Our empirical results support both hypotheses. Number of local generic competitors has a significantly negative effect on local product price but no effect on global product price, while number of global therapeutic competitors has a significantly negative effect on global product price. Policy changes that encourage bioequivalent local products and accelerate global product approvals will enhance price competition in China.

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Authors and Affiliations

  1. Public Policy Department, AstraZeneca Pharmaceuticals 1800 Concord Pike, Wilmington, DE, 19850-5437

    Y. Richard Wang

  2. Leonard Davis Institute of Health Economics, University of Pennsylvania, Pennsylvania

    Y. Richard Wang

Authors
  1. Y. Richard Wang
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Correspondence to Y. Richard Wang.

Additional information

JEL Code I11, L11

Disclosure: This project was funded by AstraZeneca Pharmaceuticals. The views expressed in this article do not represent those of AstraZeneca Pharmaceuticals.

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Wang, Y.R. Price competition in the chinese pharmaceutical market. Int J Health Care Finance Econ 6, 119–129 (2006). https://doi.org/10.1007/s10754-006-5558-5

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  • DOI: https://doi.org/10.1007/s10754-006-5558-5

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