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Pharmaceutical parallel trade in Europe: stakeholders and competition effects

Kanavos, Panos ORCID: 0000-0001-9518-3089 and Costa-i-Font, Joan ORCID: 0000-0001-7174-7919 (2005) Pharmaceutical parallel trade in Europe: stakeholders and competition effects. Economic Policy, 20 (44). pp. 751-798. ISSN 0266-4658

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Identification Number: 10.1111/j.1468-0327.2005.00150.x


Pharmaceutical parallel trade in the European Union is a large and growing phenomenon, and hope has been expressed that it has the potential to reduce prices paid by health insurance and consumers and substantially to raise overall welfare. In this paper we examine the phenomenon empirically, using data on prices and volumes of individual imported products. We have found that the gains from parallel trade accrue mostly to the distribution chain rather than to health insurance and consumers. This is because in destination countries parallel traded drugs are priced just below originally sourced drugs. We also test to see whether parallel trade has a competition impact on prices in destination countries and find that it does not. Such competition effects as there are in pharmaceuticals come mainly from the presence of generics. Accordingly, instead of a convergence to the bottom in EU pharmaceutical prices, the evidence points at 'convergence to the top'. This is explained by the fact that drug prices are subjected to regulation in individual countries, and by the limited incentives of purchasers to respond to price differentials.

Item Type: Article
Official URL:
Additional Information: © 2005 Wiley
Divisions: Social Policy
European Institute
LSE Health
Subjects: H Social Sciences > HD Industries. Land use. Labor
Date Deposited: 04 Sep 2008 14:33
Last Modified: 02 Apr 2024 06:42

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