The effect of regulation on pharmaceutical revenues: Experience in nineteen countries

Health Affairs

Volumn 28, Issue 1, 2009, Pages

  Sood, Neeraj ^a   De Vries, Han ^a   Gutierrez, Italo ^b   Lakdawalla, Darius N ^a   Goldman, Dana P ^a  

^a RAND CORPORATION   (United States)

^b UNIVERSITY OF MICHIGAN   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; COST CONTROL; COST EFFECTIVENESS ANALYSIS; DEVELOPING COUNTRY; DRUG COST; DRUG INDUSTRY; ECONOMIC EVALUATION; UNITED STATES;

DEVELOPED COUNTRIES; GOVERNMENT REGULATION; PHARMACEUTICAL SERVICES; UNITED STATES;

EID: 59449110007     PISSN: 02782715     EISSN: 02782715     Source Type: Journal    
DOI: 10.1377/hlthaff.28.1.w125     Document Type: Article

References (28)

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5. Alex Azar, deputy secretary, U.S. Department of Health and Human Services, "What Is Your Health Worth to Your Bureaucrat?" (Berlin, Germany, 2006);
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7. P.M. Danzon and L.W. Chao, "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law and Economics 43, no. 2 (2000): 311-358;
8. P.M. Danzon and J.D. Ketcham, "Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand," Frontiers in Health Policy Research 7 (2004): 1-54;
9. P.M. Danzon, Y.R. Wang, and L. Wang, "The Impact of Price Regulation on the Launch Delay of New Drugs - Evidence from Twenty-Five Major Markets in the 1990s," Health Economics 14, no. 3 (2005): 269-292;
10. and M.K. Kyle, "Strategic Responses to Parallel Trade," Working Paper (London: London Business School, 2007).
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13. U.S. Department of Commerce, Pharmaceutical Price Controls in OECD Countries (Washington: U.S. Government Printing Office, 2004).
14. N. Pavcnik, "Do Pharmaceutical Prices Respond to Potential Out-of-Pocket Expenses?" RAND Journal of Economics 33, no. 3 (2002): 469-487;
15. and M. Pekurinen and U. Hakkinen, Regulating Pharmaceutical Markets in Finland (Helsinki: STAKES, 2005).
16. Pavcnik, "Do Pharmaceutical Prices Respond?"
17. Cockburn et al., "Patents, Price Controls, and Access to New Drugs."
18. Appendix A is available online at http://content.healthaffairs.org/cgi/ content/full/hlthaff.28.1.w125/DC2. Regulatory data are available from Neeraj Sood, sood@rand.org.
19. The first-order autocorrelation structure seems most consistent with the data. We found no evidence of unit roots, using the augmented Dickey-Fuller test. Moreover, models of second-order autocorrelation (with standard errors calculated according to the Newey-West covariance matrix) produced results qualitatively similar to those presented in Exhibit 4. These sensitivity analyses are available from the authors upon request; send e-mail to sood@rand.org.
20. One possibility advanced by the pharmaceutical industry is that cost savings from reference pricing of generics could be used to purchase more costly brand-name drugs.
21. See online Appendix B, as in Note 10.
22. Danzon et al., "The Impact of Price Regulation."
23. We do not have data on standard units for 1992 and 1993 for all countries. In addition, data from New Zealand are missing for all years, data from Norway are missing from 1992 to 1995, and data from the Netherlands are missing from 1992 to 2000. For a discussion of issues involved in measuring quantities of drugs sold across countries see E.R. Berndt, P.M. Danzon, and G.B. Kruse, "Dynamic Competition in Pharmaceuticals: Cross-National Evidence from New Drug Diffusion," Managerial and Decision Economics 28, no. 4-5 (2007): 231-250.
24. For example, financial incentives to physicians for prescribing generics and higher pharmacy margins for generics.
25. Danzon and Ketcham, "Reference Pricing of Pharmaceuticals for Medicare."
26. Azar, "What Is Your Health Worth to Your Bureaucrat?"
27. Acemoglu and Linn, "Market Size in Innovation"; and F.M. Scherer, "The Link between Gross Profitability and Pharmaceutical R&D Spending," Health Affairs 20, no. 5 (2001): 216-220.
28. D. Lakdawalla et al., "U.S. Pharmaceutical Policy in a Global Marketplace," Health Affairs 28, no. 1 (2009): w138-w150 (published online 16 December 2008; 10.1377/hlthaff.28.1.w138).