Reference pricing in the presence of pseudo-generics

Gonçalves, Ricardo; Rodrigues, Vasco Sanchez; Vasconcelos, Hélder

doi:10.1007/s10754-015-9165-1

Cited by 3 publications

(5 citation statements)

References 21 publications

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“…On the theoretical side, we note that some of our results deviate from the extant literature. Particularly, our conclusion -that, under RP, prices are increasing in the copayment rate -differs from Brekke et al (2007) and Gonçalves et al (2015), who find that prices are independent of the copayment rate, and from Brekke et al (2011), who conclude that they are decreasing in the same variable. These models are built on different assumptions, and further work seems necessary to reconcile them and to fully characterize the conditions under which each of the possibilities holds.…”

Section: Discussioncontrasting

confidence: 91%

“…First, we find that, under RP, prices increase with the copayment rate, converging to FPR prices as it approaches one. This differs from Brekke et al (2007) and Gonçalves et al (2015), who find that, under RP, prices are independent of the copayment rate. 6 Second, we find that whilst social welfare under RP is always higher than under FPR (converging to the latter as the copayment rate approaches one), it decreases with the copayment rate.…”

Section: Introductioncontrasting

confidence: 84%

“…These results are in line with those of Brekke et al (2007), Rodrigues et al (2014), and Gonçalves et al (2015). 14 Note that p F i = (1/ )p NR i , with i ∈ {b, g}.…”

Section: Fixed Percentage Reimbursementsupporting

confidence: 79%

“…() and Gonçalves et al . (), who find that prices are independent of the copayment rate, and from Brekke et al . (), who conclude that they are decreasing in the same variable.…”

Section: Discussionmentioning

confidence: 85%

“…() and Gonçalves et al . (), who find that, under RP, prices are independent of the copayment rate . Second, we find that whilst social welfare under RP is always higher than under FPR (converging to the latter as the copayment rate approaches one), it decreases with the copayment rate.…”

Section: Introductionmentioning

confidence: 98%

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Reference Pricing with Elastic Demand for Pharmaceuticals

Gonçalves

Rodrigues

2017

Scandinavian J Economics

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In this paper, we re-examine the properties of two commonly adopted government reimbursement schemes for pharmaceuticals: reference pricing and fixed percentage reimbursement. We depart from the previous literature by assuming that the individual demand is price-sensitive and depends on the copayment rate (i.e., the part paid by each consumer). We obtain two novel results under reference pricing: first, as the copayment rate increases, so do pharmaceutical prices; second, this increase in pharmaceutical prices reduces social welfare. Whilst reference pricing does emerge as a preferable reimbursement scheme, demand elasticities and the copayment rate interact in complex ways. This leads (unexpectedly) to the possibility that a higher copayment rate (lower reimbursement rate) results in higher government expenditure.

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Section: Discussioncontrasting

confidence: 91%

Section: Introductioncontrasting

confidence: 84%

“…These results are in line with those of Brekke et al (2007), Rodrigues et al (2014), and Gonçalves et al (2015). 14 Note that p F i = (1/ )p NR i , with i ∈ {b, g}.…”

Section: Fixed Percentage Reimbursementsupporting

confidence: 79%

“…() and Gonçalves et al . (), who find that prices are independent of the copayment rate, and from Brekke et al . (), who conclude that they are decreasing in the same variable.…”

Section: Discussionmentioning

confidence: 85%

Section: Introductionmentioning

confidence: 98%

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Reference Pricing with Elastic Demand for Pharmaceuticals

Gonçalves

Rodrigues

2017

Scandinavian J Economics

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Endogenous versus exogenous generic reference pricing for pharmaceuticals

Antoñanzas

Juárez-Castelló

Rodríguez–Ibeas

2017

Int J Health Econ Manag.

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In this paper we carry out a vertical differentiation duopoly model applied to pharmaceutical markets to analyze how endogenous and exogenous generic reference pricing influence competition between generic and branded drugs producers. Unlike the literature, we characterize for the exogenous case the equilibrium prices for all feasible relevant reference prices. Competition is enhanced after the introduction of a reference pricing system. We also compare both reference pricing systems on welfare grounds, assuming two different objective functions for health authorities: (i) standard social welfare and (ii) gross consumer surplus net of total pharmaceutical expenditures. We show that regardless of the objective function, health authorities will never choose endogenous reference pricing. When health authorities are paternalistic, the exogenous reference price that maximizes standard social welfare is such that the price of the generic drug is the reference price while the price of the branded drug is higher than the reference price. When health authorities are not paternalistic, the optimal exogenous reference price is such that the price of the branded drug is the reference price while the price of the generic drug is lower than the reference price.

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Reference pricing with endogenous generic entry

Brekke

Canta

Straume

2016

Journal of Health Economics

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In this paper we study the e¤ect of reference pricing on pharmaceutical prices and expenditures when generic entry is endogenously determined. We develop a Salop-type model where a brand-name producer competes with generic producers in terms of prices. In the market there are two types of consumers: (i) brand biased consumers who choose between brand-name and generic drugs, and (ii) brand neutral consumers who choose between the di¤erent generic drugs. We …nd that, for a given number of …rms, reference pricing leads to lower prices of all products and higher brand-name market shares compared with a reimbursement scheme based on simple coinsurance. Thus, in a free entry equilibrium, the number of generics is lower under reference pricing than under coinsurance, implying that the net e¤ects of reference pricing on prices and expenditures are ambiguous. Allowing for price cap regulation, we show that the negative e¤ect on generic entry can be reversed, and that reference pricing is more likely to result in cost savings than under free pricing. Our results shed light on the mixed empirical evidence on the e¤ects of reference pricing on generic entry.

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Reference pricing in the presence of pseudo-generics

Cited by 3 publications

References 21 publications

Reference Pricing with Elastic Demand for Pharmaceuticals

Reference Pricing with Elastic Demand for Pharmaceuticals

Endogenous versus exogenous generic reference pricing for pharmaceuticals

Reference pricing with endogenous generic entry

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