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Is medicines parallel trade ‘regulatory arbitrage’?

Costa-i-Font, Joan (2016) Is medicines parallel trade ‘regulatory arbitrage’? International journal of Health Economics and Management, 16 (4). pp. 321-336. ISSN 2199-9023

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Identification Number: 10.1007/s10754-016-9199-z

Abstract

Parallel trade (PT) is a phenomenon that takes place at the distribution level, when a patented product is diverted from the official distribution chain to another one where it competes as a parallel distributor. Although some research regards PT in Europe as a ‘common’ form of arbitrage, there are reasons to believe that it is a type of ‘regulatory arbitrage’ that does not necessarily produce equivalent welfare effects. We draw upon a unique dataset that contains source country records of parallel imported medicine sales to the Netherlands for one therapeutic group (statins), that accounts for 5%of the market at the time of study and it faced no generic competition. We estimate precise differences in prices and statutory distribution margins for each source country/product and, examine whether they drive parallel import flows using a gravity specification and an instrumental variable strategy. Our findings reveal that parallel imports are driven by cross-country differences in statutory distribution margins in addition to price differences, consistently with the hypothesis of PT being a type of ‘regulatory arbitrage’.

Item Type: Article
Official URL: http://www.springer.com/public+health/journal/1075...
Additional Information: © 2016 The Authors
Divisions: LSE
Subjects: R Medicine > RA Public aspects of medicine
Sets: Research centres and groups > LSE Health and Social Care
Date Deposited: 07 Sep 2016 09:54
Last Modified: 19 Nov 2019 12:33
URI: http://eprints.lse.ac.uk/id/eprint/67603

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