Library Header Image
LSE Research Online LSE Library Services

Is medicines parallel trade ‘regulatory arbitrage’?

Costa-Font, Joan ORCID: 0000-0001-7174-7919 (2016) Is medicines parallel trade ‘regulatory arbitrage’? International journal of Health Economics and Management, 16 (4). pp. 321-336. ISSN 2199-9023

PDF - Published Version
Available under License Creative Commons Attribution.

Download (613kB) | Preview

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


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:
Additional Information: © 2016 The Authors
Divisions: LSE
Health Policy
Subjects: R Medicine > RA Public aspects of medicine
Date Deposited: 07 Sep 2016 09:54
Last Modified: 20 Sep 2021 03:01

Actions (login required)

View Item View Item


Downloads per month over past year

View more statistics