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Assessing the Impact of Global Price Interdependencies

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Abstract

Documented launch delays and the ensuing debate over their underlying causes have focused on assessment from the individual country’s perspective. Seen in a larger game theoretical framework this may cause problems, because although the countries see an individual game, the pharmaceutical firm sees a repeated linked game. The links are due to external reference pricing and parallel trade. Behaviours that are optimal in the single, individual game (for either the country or the pharmaceutical firm) may no longer be optimal when considering the global repeated game.

A theoretical mixed integer linear model of the firm’s launch and pricing decisions is presented along with examples wherein international price dependencies most likely played a role. This model can help countries understand the implication of their external reference pricing policies on the global repeated pricing game. Understanding the behaviour of the pharmaceutical firm in this global context aids countries in designing policies to maximize the welfare of their citizens.

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Notes

  1. There are many different ways of determining the groupings of ‘equivalent’ drugs. Some countries only look at classifications with drugs that have the same chemical compound, whereas other countries consider all the medications that are available to treat a certain therapeutic group.

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No sources of funding were used in preparation of this article. The author has no conflicts of interest that are directly relevant to the content of this article.

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  1. Naval Postgraduate School, Defense Resources Management Institute, 699 Dyer Rd, Building 234, Monterey, California, 93943, USA

    Anke Richter

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  1. Anke Richter
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Richter, A. Assessing the Impact of Global Price Interdependencies. Pharmacoeconomics 26, 649–659 (2008). https://doi.org/10.2165/00019053-200826080-00003

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