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Price regulation and generic competition in the pharmaceutical market

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Abstract

In March 2003 the Norwegian government implemented yardstick-based price regulation schemes on a selection of drugs subjected to generic competition. The retail price cap, termed the “index price,” on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998–2004 for the six drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.

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Acknowledgements

Financial support from the Norwegian Research Council is gratefully acknowledged. We thank two referees for their comments and suggestions.

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Authors and Affiliations

  1. Norwegian School of Management and Frisch Centre, Oslo, Norway

    Dag Morten Dalen

  2. University of Oslo and Frisch Centre, Oslo, Norway

    Steinar Strøm & Tonje Haabeth

Authors
  1. Dag Morten Dalen
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  2. Steinar Strøm
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  3. Tonje Haabeth
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Corresponding author

Correspondence to Dag Morten Dalen.

Appendix

Appendix

Tables 5, 6, 7, 8, 9, 10 present the observed prices per DDD and market share in the six markets considered, annual means of monthly data, Norway 1998–2004

Table 5 ATC code A02BC01, branded drug producer: Astra Zeneca; strength 20 (in Norwegian crowns)
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Table 6 ATC code C09AA02, branded drug producer: MSD; strength 20 (in Norwegian crowns)
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Table 7 ATC code C09AA03, branded drug producer: Astra Zeneca; strength 10 (in Norwegian crowns)
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Table 8 ATC code N06AB04, branded drug producer: H. Lundbeck; strength 20 (in Norwegian crowns)
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Table 9 ATC code R06AE07, branded drug producer: UCB Pharma; strength 10 (in Norwegian crowns)
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Table 10 ATC code R06AX13, branded drug producer: Schering-Pl; strength 10 (in Norwegian crowns)
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Dalen, D.M., Strøm, S. & Haabeth, T. Price regulation and generic competition in the pharmaceutical market. Eur J Health Econ 7, 204–211 (2006). https://doi.org/10.1007/s10198-006-0357-y

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  • DOI: https://doi.org/10.1007/s10198-006-0357-y

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