Theory and implementation of differential pricing for pharmaceuticals

International Public Goods and Transfer of Technology Under a Globalized Intellectual Property Regime

Volumn , Issue , 2005, Pages 425-456

  Towse, Adrian ^b  

^a UNIVERSITY OF PENNSYLVANIA   (United States)

^b OFFICE OF HEALTH ECONOMICS   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84881925972     PISSN: None     EISSN: None     Source Type: Book    
DOI: 10.1017/CBO9780511494529.022     Document Type: Chapter

References (62)

1. This chapter is drawn from, and extends, an article the authors published as Differential Pricing for Pharmaceuticals: Reconciling Access, R&D and Patents, 3 INT’ L J.HEALTH CARE FIN. & ECON. 183 (2003).
2. J. Watal, Pharmaceutical Patents, Prices and Welfare Losses: Policy Options for India under the WTO TRIPS Agreement, 23 WORLD ECON. 733 (2000).
3. World Health Organization, Commission on Macroeconomics and Health, Working Group 4, available at http://www.who.int/macrohealth/en/.
4. Michael Kremer, Creating Markets for New Vaccines: Part 2: Design Issues, in INNOVATION POLICY AND THE ECONOMY 73 (Adam B. Jaffe et al. eds., MIT Press 2001);
5. Michael Kremer, Pharmaceuticals and the Developing World, 16 J. ECON. PERSP. 67 (2002);
6. H. Kettler & A. Towse, Public Private Partnerships for Research and Development: Medicines and Vaccines for Diseases of Poverty (Office of Health Economics Report (2002)).
7. PHRMA (PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA), INDUSTRY PROF ILE (2001).
8. J. A. Dimasi et al., The Cost of Innovation in the Pharmaceutical Industry, 10 J. HEALTH ECON. 107 (1991);
9. J.A. Dimasi et al., The Price of Innovation: New Estimates of Drug Development Costs, 22 J. HEALTH ECON. 151 (2003).
10. P.M. Danzon, Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU, 4 INT’ L J. ECON. BUS. 301 (1997).
11. F.M. SCHERER & D. ROSS, INDUSTRI A L MARKET STRUCTURE AND ECONOMIC PERFORMANCE 621 (Houghton Mifflin Company 3d ed. 1990);
12. J. TI ROLE, THE THEORY OF INDUSTRIAL ORGANIZATION (MIT Press 1988).
13. Hannah E. Kettler & Chris Collins, Balancing Health Needs and Drug Research Incentives, COOPERATION S.J., available at http://www.eldis.org/static/DOC11608.htm (last accessed on 10 June 2004).
14. M. Kremer, A Mechanism for Encouraging Innovation, Harvard University, Development Discussion Paper No. 533 (1996).
15. M. Ganslandt et al., Developing and Distributing Essential Medicines to Poor Countries: The DEFEND Proposal, 24 WORLD E CON. 79 (2001).
16. J.O. Lanjouw, A Patent Policy for Global Diseases: US and International Legal Issues, 16 H ARV. J.L. & T ECH. 86 (2002).
17. P. L AYARD & A. WALTERS, MICRO-ECONOMIC T HEORY (McGraw-Hill 1978).
18. J.O. Lanjouw, Introduction of Pharmaceutical Product Patents in India: “Heartless exploitation of the poor and suffering?,” NBER Working Paper Series No 6366 (1998).
19. C. Fink, Patent Protection, Transnational Corporations, and Market Structure: A Simulation Study of the Indian Pharmaceutical Industry, 1 J. INDUS. COMPETITION & TRADE 101 (2001).
20. F.P. Ramsey, A Contribution to the Theory of Taxation, 37 ECON. J. 47 (1927).
21. W.J. Baumol & D.F. Bradford, Optimal Departures From Marginal Cost Pricing, 60 AM. ECON. REV. 265 (1970).
22. R.R. Braeutigam, Socially Optimal Pricing with Rivalry and Economies of Scale, 15 RAND J. ECON. 127 (1984).
23. J.-J. L AFFONT & J. TIROLE, A THEORY OF INCENTIVES IN PROCUREMENT AND REGULATION (MIT Press 1993).
24. J.E. Prieger, Ramsey Pricing and Competition: The Consequences of Myopic Regulation, 10 J. REG. ECON. 307 (1996).
25. P. Musgrove et al., Basic Patterns in National Health Expenditure, 80 BULL. WORLD HEALTH ORG. 134 (2002).
26. P.M. Danzon & M.F. Furukawa, Prices and Availability of Pharmaceuticals: Evidence From Nine Countries, HEALTH AFFAIRS, 29 Oct. 2003, at http://www.healthaffairs.org/WebExclusives/Danzon_Web_Excl_102903.htm (last accessed 29 Oct. 2003).
27. P.R.G. LAYARD & A.A. WALTERS, MICRO-ECONOMIC THEORY 138–141 (McGraw Hill 1978).
28. S. Musgrove et al., above n. 20. 22 See 2003–2004 PhRMA Annual Report, at http://www.phrma.org/publications/publications//2003–11–20.870.pdf.
29. H.G. Grabowski & J.M. Vernon, A New Look at the Returns and Risks to Pharmaceutical R&D, 36 MGMT. SC 1. 804 (1990);
30. H.G. Grabowski & J.M. Vernon, Returns on Research and Development for 1990s New Drug Introductions, 20 PHARMACOECONOMICS 11 (2002).
31. W. Jack & J.O. Lanjouw, Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute? Centre for Global Development, Working Paper No. 28 (2003).
32. H. Averch & L. Johnson, Behavior of the Firm Under Regulatory Constraint, 52 AM. ECON. REV. 1052 (1962).
33. D. Thierer, 20th Anniversary of Airline Deregulation: Cause for Celebration, Not Re-Regulation, The Heritage Foundation, Backgrounder #1173 (22 Apr. 1998), available at http://www.heritage.org/Research/Regulation/BG1173.cfm.
34. Hal R. Varian, Price Discrimination and Social Welfare, 75 AM. ECON. REV. 870 (1985).
35. D.A. Malueg & M. Schwartz, Parallel Imports, Demand Dispersion, and International Price Discrimination, 37 J. INT’ L ECON. 167 (1994).
36. J. Dumoulin, Global Pricing Strategies for Innovative Essential Drugs, 3 INT’ L J. BIOTECH. 338 (2001).
37. J.A. Hausman & J.K. MacKie-Mason, Price Discrimination and Patent Policy, 19 RAND J. ECON. 253 (1988).
38. F.M. Scherer & Jayashree Watal, Post-TRIPS Options for Access to Patented Medicines in Developing Nations, 5 J. INT’ L ECON. L. 913 (2002).
39. G. Dyer, Netherlands Acts on Re-sold AIDS Drugs, FINANCIAL TIMES, 22 Oct. 2002, at 8.
40. Parallel Imports of Proprietary Medicines, European Commission Communication (19 Jan. 2004), available at http://europa.eu.int/comm/internal_market/goods/docs/medicines/2004– 01-comm_en.pdf.
41. Judd Gregg, Gregg Introduces Bill to Allow for Safe Importation of Prescription Drugs from Canada (2 June 2004), available at http://gregg.senate.gov/press/press060204.htm.
42. The Pharmaceutical Market Access Act of 2003, Congressional Budget Office Cost Estimate, available at http://www.cbo.gov/showdoc.cfm?index=4852&sequence=0.
43. R. Manning, Products Liability and Prescription Drug Prices in Canada and the United States, 40 J.L. & ECON. 203 (1997).
44. P. Danzon & J. Ketcham, Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands and New Zealand, NBER Working Paper w10007 (Oct. 2003).
45. P.M. Danzon et al., The Impact of Price Regulation on the Launch Delay of New Drugs: Evidence from Twenty Five Countries in the 1990s, The Wharton School Working Paper (2003).
46. S. Hausman & S. MacKie-Mason, above n. 37, at 256.
47. John Vernon, Price Regulation, Capital Market Imperfections and Strategic R&D Investment Behavior in the Pharmaceutical Industry: Consequences for Innovation (2003) (Applied Economics PhD Dissertation, University of Pennsylvania).
48. K.E. Maskus, Parallel Imports in Pharmaceuticals: Implications for Competition and Prices in Developing Countries, Final Report to World Intellectual Property Organization (2001).
49. http://uspirg.org/uspirgnewsroom.asp?id2=10393&id3=USPIRGnewsroom& (last visited 4 June 2004).
50. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub L. No. 108–117 Stat. 2066, available at http://thomas.loc.gov/cgi-bin/query/D?c108:4:./temp/~c108qPjAVJ.
51. Kaiser Foundation at www.kff.org.
52. The Pharmaceutical Industry (Jan. 1996), available at http://www.cbo.gov/showdoc.cfm?index=4750&sequence=0.
53. G.A. Stigler, A Theory of Oligopoly, 72 J. POL ECON. 44 (1964);
54. F.M. Scherer, How US Antitrust Can Go Astray: The Brand Name Prescription Drug Litigation, 4 INT’ L J. ECON. BUS. 239 (1997).
55. The numbers of additional patients receiving tuberculosis and malaria treatments should become even higher. See The Global Fund, Our Track Record, at http://www.theglobalfund.org/en/about/record/.
56. Report of the Task Force on Procurement and Supply Management (2002), available at www.globalfundatm.org/publicdoc/Third%20Board%20Meeting.pdf.
57. Wholesale price data can be purchased from IMS Health; however these data omit offinvoice discounts. See www.IMSHealth.com.
58. Press Release, European Commission, Access to Medicines, IP/03/748 (26 May 2003), available at http://europa.eu.int/comm/trade/csc/med.htm.
59. H. Averch & L. Johnson, Behavior of the Firm Under Regulatory Constraint, 52 AM. ECON. REV. 1052 (1962).
60. WTO General Council Decision No. WT/L/540 (30 Aug. 2003), available at http://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm#asterisk.
61. H.G. Grabowski & J.M. Vernon, Brand Loyalty, Entry and Price Competition in Pharmaceuticals After the Drug Act, 35 J.L. & ECON. 331 (1992).
62. P.M. Danzon & L. Chao, Does Regulation Drive Out Competition in the Pharmaceutica Industry?, 43 J.L. & ECON. 311 (2000).