price regulation in the pharmaceutical industry prescription or placebo president clinton and several legislators have proposed restrictions on price increases in the pharmaceutical industry similar to those on some public utilities studies however suggest that under conditions of rapidly changing demand as found in pharmaceuticals price caps could be manipulated using simulations we show that in reaction to regulation pharmaceutical firms would optimally set launch prices 50 percent higher than in an unregulated market although initially hurt after seven years consumers benefit as the unregulated price rises above the price cap thus before enacting legislation congress should assess america s willingness to pay more now for lower prices in the future

a new look at the returns and risks to pharmaceutical r d this study investigates the returns to r d for 100 new drugs introduced into the united states during the decade of the 1970s in contrast to prior studies it incorporates several significant structural changes that have occurred in the pharmaceutical industry during the 1980s these include higher real drug prices and a greater degree of generic competition a major finding is that the return on r d for the average new drug is approximately equal to the 9 percent industry cost of capital however the performance of new drugs introduced during the latter half of the 1970s was markedly better than that of early 1970s introductions this latter finding is consistent with the more rapid rate of industry growth in real r d expenditures the study also finds that the variation in returns is highly skewed with only the top 30 drugs covering mean r d costs on a fully allocated basis finally it is shown that real drug price increases in the 1980s were necessary for the average new drug introduction to recover its r d costs

regulatory policy and the location of bio pharmaceutical foreign direct investment in europe this paper examines the relationship between cross country differences in drug price regulation and the location of biopharmaceutical foreign direct investment fdi in europe simple theory predicts that price regulation in one country might affect total investment but not the location of that investment if sales are global nevertheless some manufacturers threaten that the introduction of price regulation in a country will motivate them to move their investments to other countries are such threats cheap talk or is there evidence that firms avoid price controlling countries when making fdi location choices we use data on 527 investments initiated in 27 european countries between 2002 and 2009 and find that investors are less likely to choose countries with price controls after controlling for other determinants of investment we also observe a relative decline in investment in countries that increased the stringency of regulatory regimes during our sample period the effect is restricted to non manufacturing investments and is most robust for those related to administrative functions

drug prices and research and development investment behavior in the pharmaceutical industry abstract this paper argues theoretically and shows empirically that pharmaceutical r d spending increases with real drug prices after holding constant other determinants of research and development r d specifically an estimated elasticity suggests that a 10 percent increase in the growth of real drug prices is associated with nearly a 6 percent increase in the growth of r d intensity simulations that are based on our multiple regression model indicate that the capitalized value of pharmaceutical r d spending would have been about 30 percent lower if the federal government had limited the rate of growth in drug price increases to the rate of growth in the general consumer price index during the period 1980 2001 moreover the results suggest that a drug price control regime would have resulted in 330 65 fewer new drugs representing over one third of all actual new drug launches brought to the global market during that time period

comparing approval procedures for new drugs we analyse how drug approval procedures influence the incentives of pharmaceutical firms to commercialise new drugs in the presence of international reference pricing since 1995 the european medicines agency ema coordinates a centralised approval procedure for specific new drugs in the eu with such a centralised procedure the ema grants simultaneous drug approvals for all eu countries alongside non centralised procedures coexist for approvals of other new drugs and approvals can be sequential we focus on the effects of the exogenous timing of drug approvals either simultaneous or sequential and we compare the effects of centralised versus non centralised procedures on the firms incentives to commercialise new drugs in different markets in a context of international reference pricing we show that a centralised procedure limits the number of countries where the firm commercialises new drugs compared to a non centralised procedure we also show in a simplified framework that countries are better off with non centralised procedures while pharmaceutical firms in theory prefer the drug to be approved everywhere as soon as possible as in an early centralised procedure this is in line with the stated objective of the ema to generate savings for the pharmaceutical firms

cournot equilibrium calculation in power networks an optimization approach with price response computation since deregulated power markets are very often oligopolistic ones efficient models that are able to describe strategic behavior of firms must be developed in particular transmission constraints can easily increase the opportunities of market players to exercise market power this paper presents a model that describes the firms strategic interaction based on nash cournot equilibrium when the power network is taken into account specifically this paper introduces a new iterative algorithm that explicitly considers how the production at a certain bus affects the whole network and consequently models the opportunities for the firms of exercising market power taking into account their ability to influence the composition of the set of constrained lines the theoretical basis of the method as well as a case study based on the central european network is included

welfare effects of expansions in equilibrium models of an electricity market with fuel network the welfare of electricity producers and consumers depends on congestion in the transmission grid generation costs that consist mainly of fuel costs and strategic behavior we formulate a game theoretic model of an oligopolistic electricity market where generation costs are derived from a fuel supply network the game consists of a fuel dispatcher that transports fuels at minimum cost to meet generator demands generators that maximize profit in cournot competition and an independent system operator iso that sets nodal prices to balance electricity supply with linear demand functions we prove the existence of an equilibrium if fuel supplies are unlimited the same equilibria hold in a simplified version of the game in which each generator optimizes its fuel acquisition from the network in some very simple examples under different assumptions about the rationality of generators with respect to iso decisions paradoxical effects on total welfare can occur from expanding either electricity transmission capacity or the transportation capacity of low cost fuel we find some instances in which the paradox occurs only under bounded rationality of the generators others where it occurs only if the generators are fully rational and still others where it occurs to different degrees under the two rationality assumptions

a multiperiod generalized network flow model of the u s integrated energy system part i model description this paper is the first of a two part paper presenting a multiperiod generalized network flow model of the integrated energy system in the united states part i describes the modeling approach used to evaluate the economic efficiencies of the system wide energy flows from the coal and natural gas suppliers to the electric load centers under the proposed problem formulation fuel supply and electricity demand nodes are connected via a transportation network and the model is solved for the most efficient allocation of quantities and corresponding prices the methodology includes physical economic and environmental aspects that characterize the different networks part ii of this paper provides numerical results that demonstrate the application of the model

pricing and patents of hiv aids drugs in developing countries this article provides empirical evidence on the impact of patents on drug prices across developing countries it uses sales data on human immunodeficiency virus hiv acquired immuno deficiency syndrome aids drugs in a sample of 34 low and middle income countries between 1995 and mid 2000 the main findings are that patents do shift drug prices up drug prices are correlated to per capita income levels and drug firms follow a skimming strategy when pricing new hiv aids drugs that is there is across country and intertemporal price discrimination in the global drug markets

the measurement of retail output and the retail revolution the computerization of retailing has made price dispersion a norm in the united states so that any given list price or transactions price is an increasingly imperfect measure of a product s resource cost as a consequence measuring the real output of retailers has become increasingly difficult food retailing is used as a case study to examine data problems in retail productivity measurement crude direct measures of grocery store output suggest that the cpi for food at home may have been overstated by 1 4 percentage points annually from 1978 to 1996 this abstract was borrowed from another version of this item

international effects of national regulations external reference pricing and price controls under external reference pricing erp the price that a government permits a firm to charge in its market depends upon the firm s prices in other countries in a two country home and foreign model where demand is asymmetric across countries we show that home s unilaterally optimal erp policy permits the home firm to engage in a threshold level of international price discrimination above which it is just willing to export if the firm faces a price control abroad or bargains over price with the foreign government an erp policy can even yield higher home welfare than a direct price control

a simple model of pharmaceutical price dynamics abstract branded pharmaceutical firms use price and promotional strategy to manage public knowledge about their drugs we propose a dynamic theory of pharmaceutical pricing and conduct an exploratory empirical analysis inspired by the theory our theory predicts a pattern of increasing prices and decreasing promotional activities over a drug s life cycle prices are kept low and advertising levels high early in the life cycle in order to build public knowledge about the drug as knowledge grows prices rise and advertising falls if the management of this stock is important enough this tendency of prices to rise can overwhelm the price decreasing effect of entry by generic competitors late in the drug life cycle we argue that our theory of price dynamics explains empirical regularities in this industry

sales growth of new pharmaceuticals across the globe the role of regulatory regimes prior marketing literature has overlooked the role of regulatory regimes in explaining international sales growth of new products this paper addresses this gap in the context of new pharmaceuticals 15 new molecules in 34 countries and sheds light on the effects of regulatory regimes on new drug sales across the globe based on a time varying coefficient model we find that differences in regulation substantially contribute to cross country variation in sales one of the regulatory constraints investigated i e manufacturer price controls has a positive effect on drug sales the other forms of regulation such as restrictions of physician prescription budgets and the prohibition of direct to consumer advertising dtca tend to hurt sales the effect of manufacturer price controls is similar for newly launched and mature drugs by contrast regulations on physician prescription budgets and dtca have a differential effect for newly launched and mature drugs whereas the former hurts mature drugs more the latter has a larger effect on newly launched drugs in addition to these regulatory effects we find that national culture economic wealth and lagged sales also affect drug sales our findings may be used as input by managers for international launch and marketing decisions they may also be used by public policy administrators to assess the role of regulatory regimes in pharmaceutical sales growth

a gift is not always a gift heterogeneity and long term effects in a gift exchange experiment we study gift exchange in a field experiment where a random subsample of participants in the swiss labour force survey received vouchers to be used in adult training actual voucher redemption can be traced giving us the unique opportunity to study whether gift exchange in the form of participation in future rounds of the survey depends on the perceived usefulness of the gift the group of voucher recipients as a whole has significantly higher response rates there is considerable heterogeneity however our results point to a long lasting gift exchange relationship only for the subgroup that redeemed their vouchers

trips and the international public health controversies issues and challenges the aim of this article is to contribute to an evaluation of the meaning and practical effects of the trade related intellectual property rights trips agreement on public health issues section 2 presents the situation that prevailed for intellectual property ip protection in the pharmaceutical industry before the signing of the trips in both developed countries and developing countries dcs section 3 is devoted to a presentation of the key changes that have taken place at the legal level with the signing of the trips providing an opportunity to highlight the way in which trips has disrupted the existing situation by generating a series of serious tensions notably in the relations between north and south countries section 4 is devoted to the new challenges posed by the post 2005 scenario 2005 being the end of the transition period granted dcs to comply with the trips requirements section 5 focusing on the brazilian anti aids program tries to illustrate how the post 2005 scene has narrowed the margins for efficient action against the aids pandemics and put the brazilian national public health program under strain copyright 2006 oxford university press

cross national price differences for pharmaceuticals how large and why bilateral drug price and quantity indexes based on comprehensive data for seven countries us canada france germany italy japan and the uk refute the conventional wisdom that us drug prices are much higher than elsewhere for laspeyres us weighted indexes previous drug price comparisons are biased by unrepresentative samples and unweighted indexes quasi hedonic regression shows that cross national price differences reflect differences in product characteristics and in their implicit prices which reflect the regulatory regime strict price regulation systematically lowers prices for older molecules and globally diffused molecules generic competition lowers prices in less regulated regimes which also have more price elastic demand

generic drug industry dynamics both the economics literature and the business press suggest that a typical pattern for a new industry or what jovanovic and macdonald 1994 call an invention i s to have an initial phase in which a small number of firms each earn significant profits followed by a phase in which rapid entry of new firms leads to increased competition and dissipation of some of those profits often accompanied by a shakeout whereby only a few large firms remain especially if subsequent innovations increase the optimal scale although this pattern seems to characterize many industries the length of time during which early movers retain their profits how prices adjust during the entry process and the

price regulation and parallel imports of pharmaceuticals abstract this paper studies the effects of price regulation and parallel imports in the on patent pharmaceutical market in a theory model where the producer price is subject to bargaining between the brand name producer and a distributor we show that the effects of stricter price regulation crucially depend on whether the producer faces competition from parallel imports while parallel imports improve the bargaining position of the distributor price regulation counteracts this effect and may even be profitable for the producer we test the implications of our model on a unique dataset with information on sales and prices at both producer and retail level for 165 substances over 4 years 2004 2007 we show that stricter price regulation reduces competition from parallel imports and has no strictly negative effect on producer profits in the presence absence of parallel imports our results suggest that price regulation might improve static efficiency without being harmful for dynamic efficiency in the presence of parallel imports

competition in off patent drug markets issues regulation and evidence in recent years health insurers have placed a great deal of emphasis on the ability of generic medicines to deliver significant savings to overstretched health care budgets due to their lower cost and potential for a more efficient resource allocation in this paper we study market developments after patent expiry whether health insurance captures the financial benefits from cheaper generics and whether regulation and product differentiation among others have any power in explaining originator and generic price movements generic entry and diffusion we find that health insurance does not capitalize fully or fast enough on the cost advantage of generic medicines either because generic policies do not encourage their fast uptake or because generic drug prices are high and frequently tied directly or indirectly to originator drug prices we also find that reference pricing a particular form of reimbursement regulation encourages generic entry and reduces generic prices but only marginally finally in generic markets characterized by homogeneous products we find evidence of product differentiation which is impacting prices upwards rather than downwards if health insurance is to benefit fully from generic medicines it ought to encourage faster uptake and price competition and discourage price fixing regulation that ties generic prices to those of originator brands panos kanavos joan costa font and elizabeth seeley

is american health care uniquely inefficient evidence from prescription drugs abstract alan garber and jonathan skinner 2008 famously conjectured that the us health care system was uniquely inefficient relative to other countries we test this idea using cross country data on prescription drug sales newly linked with an arguably objective measure of relative therapeutic benefits or drug quality specifically we investigate how higher and lower quality drugs diffuse in the us relative to australia canada switzerland and the uk our tabulations suggest that lower quality drugs diffuse more in the us relative to high quality drugs compared to each of our four comparison countries consistent with garber and skinner s conjecture

static and dynamic effects of health policy evidence from the vaccine industry public policies designed to increase utilization of existing technologies may also affect incentives to develop new technologies this paper investigates this phenomenon by examining policies designed to increase usage of preexisting vaccines i find that these policies were associated with a 2 5 fold increase in clinical trials for new vaccines for several diseases the induced innovation is socially wasteful though small in magnitude in one case however the dynamic social welfare benefits from induced innovation exceed the policies static benefits from increasing vaccination with existing technology these findings underscore the importance of including technological progress in economic analysis of public policy

gift giving and worker productivity evidence from a firm level experiment abstract we present results from a field experiment designed to measure worker response to a monetary gift from their employer the experiment took place inside a tree planting firm paying its workforce incentive contracts firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity we compare planter productivity the number of trees planted per day on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block and thus under similar planting conditions we find direct evidence that the gift had a significant and positive effect on daily planter productivity controlling for planter fixed effects weather conditions and other random daily shocks

pharmaceutical price controls and entry strategies abstract this paper finds that the use of price controls has a statistically and quantitatively important effect on the extent and timing of the launch of new drugs firms headquartered in countries that regulate price reach fewer markets than those in countries without price controls companies avoid price controlled markets and are less likely to introduce products in additional markets after entering a price controlled country launches into low price european countries are further delayed following legalization of parallel imports the results suggest that price regulation in one country affects entry into other countries and may affect the strategies of domestic firms

pricing of drugs with heterogeneous health insurance coverage in this paper we examine the role of insurance coverage in explaining the generic competition paradox in a two stage game involving a single producer of brand name drugs and n quantity competing producers of generic drugs independently of brand loyalty which some studies rely upon to explain the paradox we show that heterogeneity in insurance coverage may result in higher prices of brand name drugs following generic entry with market segmentation based on insurance coverage present in both the pre and post entry stages the paradox can arise when the two types of drugs are highly substitutable and the market is quite profitable but does not have to arise when the two types of drugs are highly differentiated however with market segmentation occurring only after generic entry the paradox can arise when the two types of drugs are weakly substitutable provided however that the industry is not very profitable in both cases that is when market segmentation is present in the pre entry stage and when it is not the paradox becomes more likely to arise as the market expands and or insurance companies decrease deductibles applied on the purchase of generic drugs

pharmaceutical pricing in a regulated market we compare how new pharmaceuticals are priced in the price regulated swedish market with how they are priced in the u s market as studied by lu and comanor 1998 we collect a data set consisting of all new chemical entities nces launched in sweden between 1987 and 1997 and test the same models as lu and comanor in line with their results we find that introductory prices depend on the degree of therapeutic innovation contrary to the results from the u s market swedish real prices for nces fall substantially over time for all classes of therapeutic innovation also contrary to the findings of lu and comanor we find no effect of the presence of branded substitutes on either introduction prices or price dynamics our results indicate that the price regulation discourages price competition between brandname drugs

market based generation and transmission planning with uncertainties this paper presents a stochastic coordination of generation and transmission expansion planning model in a competitive electricity market the monte carlo simulation method is applied to consider random outages of generating units and transmission lines as well as inaccuracies in the long term load forecasting the scenario reduction technique is introduced for reducing the computational burden of a large number of planning scenarios the proposed model assumes a capacity payment mechanism and a joint energy and transmission market for investors costs recovery the proposed approach simulates the decision making behavior of individual market participants and the iso it is an iterative process for simulating the interactions among gencos transcos and iso the iterative process might be terminated by the iso based on a pre specified stopping criterion the case studies illustrate the applications of proposed stochastic method in a coordinated generation and transmission planning problem when considering uncertainties

r d in the pharmaceutical industry a world of small innovations it is commonly argued that in recent years pharmaceutical companies have targeted their research and development r d at small improvements of existing compounds instead of riskier drastic innovations in this paper we show that the bias in the pharmaceutical industry toward small innovations might be driven by the low sensitivity of the demand in particular small innovations get a proportionally larger reward because pharmaceutical firms target them at the inelastic segments of the demand as a consequence firms find it relatively more profitable to invest in small innovations we also study the effect on r d incentives of marketing strategies and regulatory instruments aimed at controlling pharmaceutical expenditure

advertising and competition in the ethical pharmaceutical industry the case of antihypertensive drugs abstract this paper uses data on the majority of name brand antihypertensive drugs marketed in the united states during 1988 93 to test the hypothesis that advertising decreases the price elasticity of demand in the pharmaceutical industry this is the first study to directly estimate the effects of drug product promotion on the price elasticity of demand in this industry we find strong evidence of an advertising effect in particular detailing efforts the salient means for product promotion in this industry systematically lower price sensitivity given the inverse relationship between elasticity of demand and price it is likely that consumers pay higher prices as a result of the advertising that occurs in this industry our findings are thus consistent with hurwitz and caves who find evidence that advertising inhibits entry into this market but in contrast to earlier research that found no anticompetitive effect

characteristics of demand for pharmaceutical products an examination of four cephalosporins we model demand for four cephalosporins and compute own and cross price elasticities between branded and generic versions of the four drugs we model demand as a multistage budgeting problem and we argue that such a model is appropriate to the multistage nature of the purchase of pharmaceutical products in particular the prescribing and dispensing stages we find quite high elasticities between generic substitutes and also significant elasticities between some therapeutic substitutes

strategic pricing of new pharmaceuticals this paper provides empirical evidence on the leading factors affecting the prices of new pharmaceuticals both at introduction and after 4 6 and 8 years most important is the extent of therapeutic advance embodied in a new product for drugs which represent important therapeutic gains launch prices can be two or three times those of existing drugs used for the same purposes while drugs that largely duplicate the actions of currently available products are typically priced at comparable levels in addition the number of branded substitutes has a substantial negative effect on launch prices which reflects the importance of competitive pressures duplicate products thereby play an important economic role in pharmaceutical markets

why competition may drive up prices abstract we show that the expected price of an incumbent firm may increase in response to increasing competition as it may become more profitable to exploit a rather immobile fraction of consumers instead of capturing a larger but more contested segment of the market to derive this result we consider two approaches of modelling the degree of competition first in a duopolistic setting competition is said to be more intense if the entrant s product becomes more attractive to the mobile fraction of buyers in this case we find that all buyers i e both the mobile and the immobile fraction may lose if the market becomes more competitive secondly in a model with two entrants competition is said to become intense if entrants serve an overlapping segment of the market for mobile buyers

in search of workers real effort reciprocity a field and a laboratory experiment we present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages work effort neither reacts to an increase of the own wage nor to a positive or negative peer comparison this result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort in an additional real effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer s surplus from the work contract is a crucial prerequisite for a positive wage effort relation this demonstrates that an employee s reciprocity requires a clear assessment of the surplus at stake jel c91 c92 j41

medical care costs how much welfare loss hardly a week goes by without a front page newspaper article on rising health care costs and the uninsured in this article i focus mainly on costs arguing that the issue has been somewhat misconceived while the level of medical care spending in the u s is a cause for concern the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem in fact cost containment may not be as urgent as is widely supposed and some proposed cost containment policies may result in welfare losses for the insured and even increase the number of uninsured

patents and the global diffusion of new drugs analysis of the timing of launches of 642 new drugs in 76 countries during 1983 2002 shows that patent and price regulation regimes strongly affect how quickly new drugs become commercially available in different countries price regulation delays launch while longer and more extensive patent rights accelerate it health policy institutions and economic and demographic factors that make markets more profitable also speed up diffusion the estimated effects are generally robust to controlling for endogeneity of policy regimes with country fixed effects and instrumental variables the results highlight the important role of policy choices in driving the diffusion of new innovations

worker reciprocity and employer investment in training standard economic theory predicts that firms will not invest in general training and will underinvest in specific training empirical evidence however indicates that firms do invest in general training of their workers evidence from laboratory experiments points to less underinvestment in specific training than theory predicts we propose a simple model in which a firm invests the socially optimal amounts in general and specific training if the worker is sufficiently motivated by reciprocity a reciprocal worker may be willing to give the firm a full return on its investment we present empirical evidence that supports the proposed mechanism workers with a high sensitivity to reciprocity have 15 higher training rates than workers with a low sensitivity to reciprocity

strategic interaction among governments in the provision of a global public good abstract how do governments respond to other governments when providing a global public good using data from 2007 to 2014 on medical research funding for infectious and parasitic diseases we examine how governments and foundations in 41 countries respond to funding changes by the us government which accounts for half of funding for these diseases because funding across governments might be positively correlated due to unobserved drivers they have in common we use variation in the representation of research intensive universities on us congressional appropriations committees as an instrument for us funding we find that a 10 increase in us government funding for a disease is associated with a 2 to 3 reduction in funding for that disease by another government in the following year

pricing profits and technological progress in the pharmaceutical industry the decades old debate over pharmaceutical industry prices profits and innovation has again intensified a number of events coalesced to refocus public interest on pharmaceuticals contributing to public concern were bureau of labor statistics price index increases for pharmaceuticals far outpacing those for the products of other industries another prominent characteristic of the pharmaceutical industry has been its extraordinarily high reported profitability this article examines the phenomena that precipitated the current pharmaceuticals debate their historical antecedents and the principal questions at issue in the author s considered judgment a pell mell march toward regulation of pharmaceutical industry pricing could seriously impair the industry s incentives for investment in new products

an evaluation of the swedish system of active labour market programmes in the 1990s we investigate the presence of short and long term effects from joining a swedish labor market program vis a vis more intense job search in open unemployment overall the impact of the program system is found to have been mixed joining a program has increased employment rates among participants a result robust to a misclassification problem in the data on the other hand it has also allowed participants to remain significantly longer on unemployment benefits and more generally in the unemployment system this being particularly the case for those entitled individuals entering a program around the time of their unemployment benefits exhaustion

tiered co payments pricing and demand in reference price markets for pharmaceuticals health insurance companies curb price insensitive behavior and the moral hazard of insureds by means of cost sharing such as tiered co payments or reference pricing in drug markets this paper evaluates the effect of price limits below which drugs are exempt from co payments on prices and on demand first using a difference in differences estimation strategy we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand name drugs in the german reference price market second estimating a nested logit demand model we show that consumers appreciate co payment exempt drugs and calculate lower price elasticities for brand name drugs than for generics this explains the different price responses of brand name and generic drugs and shows that price related co payment tiers are an effective tool to steer demand to low priced drugs

price regulation and relative delays in generic drug adoption abstract increasing the adoption of generic drugs has the potential to improve static efficiency in a health system without harming pharmaceutical innovation however very little is known about the timing of generic adoption and diffusion no prior study has empirically examined the differential launch times of generics across a comprehensive set of markets or more specifically the delays in country specific adoption of generics relative to the first country of generic adoption drawing on data containing significant country and product variation across a lengthy time period 1999 2008 we use duration analysis to examine relative delays across countries in the adoption of generic drugs our results suggest that price regulation has a significant effect on reducing the time to launch of generics with faster adoption in higher priced markets the latter result is dependent on the degree of competition and the expected market size

welfare effects of global patent protection this paper uses a simple model of invention and patent protection to examine the welfare effects of extending patent protection from the country where invention takes place to another country that is only a consumer of invented products it is shown that while the welfare of the inventing country certainly rises with the extension of patent protection that of the other country probably falls and may well fall by more than the increase in welfare of the inventing country in particular as patent protection is extended to a larger and larger portion of the world the effect on the welfare of the world as a whole of extending it to the rest of the world becomes negative

pricing patent loss and the market for pharmaceuticals dustry the drug price competition and patent term restoration act of 1984 very clearly reflects the determination of policy makers to simultaneously address issues of price control and technical progress the 1984 act increased returns to innovation by extending the period of patent protection to take into account the time between receipt of a patent and food and drug administration fda approval of a drug for sale in the market the 1984 act also reduced the testing requirements for approval of new generic brands of existing chemical entities thus reducing entry barriers in markets where patents have expired the expected outcome from eased entry conditions for generic substitutes was substantially enhanced price competition and lower prices for brand name drugs in fact prices for brand name drugs have tended to increase following entry by generics wagner and duffy 28 examined price changes for top selling generics and name brands they show substantial price increases in brand name prices accompanying large reductions in generic prices as entry of generics occurs grabowski and vernon 9 examined data on 18 major orally administered rug products subject to generic competition between 1983 and 1987 and found that the name brand price increased by an average of 7 one year subsequent to generic entry and 11 two years following generic entry

market based coordination of transmission and generation capacity planning we propose an iso model for coordinating transmission expansion planning with competitive generation capacity planning in electricity markets the purpose of the model is a holistic simulation of generation and transmission capacity expansion in the market environment the solution represents an iterative process for simulating the interactions among gencos transcos and the iso which might be terminated by the iso based on a pre specified stopping criterion the proposed model adopts a joint energy and transmission auction market and a capacity mechanism the joint auction market enables competition to occur among generation and transmission resources the capacity mechanism offers incentives for market participant investments that reflect the locational values of additional capacity transmission capacity expansion decisions are made by merchant transmission lines that recover their capacity investments through transmission marginal pricing and capacity payments transmission network security is reflected in the proposed competitive resource planning model the examples illustrate a coordinated planning of generation and transmission in restructured power systems

strategic procurement openness and market structure abstract we examine strategic procurement behaviour by governments and its effect on market structure in sectors such as defence and pharmaceuticals where the government is the dominant consumer in a world economy with trade between producer countries and between producers and non producers we use a modified dixit stiglitz utility function with an independent taste for variety there is free entry and exit by firms but by anticipating their participation constraint governments can indirectly choose the number of domestic firms and their size through its choice of procurement price unlike the standard model with no independent taste for variety and no external sector of non producer countries there are incentives for subsidies openness impacts on industrial structure and procurement coordination between producer countries affects firm numbers

regulation and firm size fda impacts on innovation this article estimates the highly differential impacts of fda regulations on pharmaceutical firms of various sizes where size is measured as scale of r d expenditures estimation is performed using the method of maximum quasi likelihoods using productivity trends of the united kingdom as a control to isolate fda regulatory effects in the united states it is shown that smaller u s pharmaceutical firms suffered devastating reductions in research productivity because of fda regulations in contrast the largest u s pharmaceutical firms apparently benefited from regulation as sales gains due to reduced competition more than offset their quite moderate declines in research productivity

reference pricing competition and pharmaceutical expenditures theory and evidence from a natural experiment abstract we study the impact of regulation on competition between brand names and generics and pharmaceutical expenditures using a unique policy experiment in norway where reference pricing rp replaced price cap regulation in 2003 for a sub sample of off patent products first we construct a vertical differentiation model to analyze the impact of regulation on prices and market shares of brand names and generics then we exploit a detailed panel data set at product level covering several off patent molecules before and after the policy reform off patent drugs not subject to rp serve as our control group we find that rp significantly reduces both brand name and generic prices and results in significantly lower brand name market shares finally we show that rp has a strong negative effect on average molecule prices suggesting significant cost savings and that patients copayments decrease despite the extra surcharges under rp

generic entry price competition and market segmentation in the prescription drug market abstract this paper studies the effects of generic entry on post patent price competition for 18 prescription drugs recently exposed to competition an independent validating test of the generic competition paradox is conducted using a newly created data set each generic entrant is associated with an average 1 increase in the branded price the one way error component model accounts for intermolecular competition market segmentation and endogeneity of entry and finds branded prices increasing by 2 alternative definitions of entry suggest that price competition is confined to the generic market the unique payer type feature of the data offers empirical evidence supporting market segmentation

the optimal organization of research evidence from eight case studies of pharmaceutical firms abstract in this paper we examine the results of interviews of scientists and executives in eight pharmaceutical companies on the issue of how best to organize the rd when the firm is playing catch up in an area of science where it is weak and when governmental policies force firms to carry out r d in particular locations

does regulation drive out competition in pharmaceutical markets abstract most countries regulate pharmaceutical prices either directly or indirectly on the assumption that competition is at best weak in this industry this paper tests the hypothesis that regulation of manufacturer prices and retail pharmacy margins undermines price competition we use data from seven countries for 1992 to examine price competition between generic competitors different manufacturers of the same compound and therapeutic substitutes similar compounds under different regulatory regimes we find that price competition between generic competitors is significant in unregulated or less regulated markets united states united kingdom canada and germany but that regulation undermines generic competition in strict regulatory systems france italy and japan regulation of retail pharmacy further constrains competition in france germany and italy regulation thus undermines the potential for significant savings on off patent drugs which account for a large and growing share of drug

generics and new goods in pharmaceutical price indexes drug prices and their rate of inflation are a major focus of current policy debates on u s health care in this paper we show that where patent expiration and generic entry are significant as they are for many important classes of drugs movements in the official price indexes may be poor indicators of the actual prices paid and the resulting changes in consumer welfare when a drug goes off patent those consumers who regard the branded and generic versions as more or less perfect substitutes experience a substantial price decline and concomitant welfare gain which the current methods used by the statistical agencies fail to capture we suggest a number of alternative ways of proceeding although our computations are based on a limited number of cases they imply that the overall rate of inflation in drug prices may be quite seriously overstated while generic pharmaceuticals are the topic of our calculations the problem discussed is also of wider importance generic drugs are a special and possibly easy case

on the determination of the us aggregate health care expenditure per capita real health care expenditure is examined against three major groups of explanatory variables economic demographic and health stock and it is found that the three groups of variables have an impact on real health care spending other subcategories such as real private and government health care pharmaceutical dental home nursing ambulatory personal medical consumption and in patient expenditures have also been examined and have been found to be affected by the explanatory variables for several subcomponents there is evidence of supplier inducement of the demographic group of variables the ageing population had an impact only on the per capita real overall and private health care outlay and pharmaceutical spending also cointegrating relationships were found and consistent estimators of the elasticities found

regulation and competition in the taiwanese pharmaceutical market under national health insurance this article investigates the determinants of the prices of pharmaceuticals and their impact on the demand for prescription drugs in the context of taiwan s pharmaceutical market where medical providers earn profit directly from prescribing and dispensing drugs based on product level data we find evidence that the profit seeking behavior of the medical providers in the prescription drug market transfers the force of competition from the unregulated wholesale market to the regulated retail market and hence market competition still plays an important role in the determination of the regulated price we also find that the profit seeking behavior plays a similar role to advertising in that it increases the brand loyalty and hence lowers price elasticity an important implication of our study is that the institutional features in the pharmaceutical market matter in shaping the nature of pharmaceutical competition and the responsiveness of pharmaceutical consumption with respect to changes in price

the price premium of generic to brand names and pharmaceutical price index the price premium of generic pharmaceuticals to brand names is examined under different competitive market situations the result of this study shows that the number market share and the age of both brand name and generic products have the most explanatory power for explaining the price premium this study further applies this method to a pharmaceutical price index in order to explain drug price index perplexities

the determinants of international patenting for nine agricultural biotechnology firms this paper examines international patent application decisions of nine agricultural biotechnology firms from 1990 2000 in australia brazil canada china the european patent office japan and south africa the data reveal a low frequency of international applications despite an initial united states application indicating very low values for patents abroad the results indicate that invention quality plays an important role in firms decisions to patent abroad and that a single international application is a good predictor of multiple international applications further significant country fixed effects suggest wide differences in business climates and patent enforcement among countries

regulation of pharmaceutical prices evidence from a reference price reform in denmark reference price systems for prescription drugs constitute widely adopted cost containment tools under these regimes patients co pay a fraction of the difference between a drug s pharmacy retail price and a reference price that is set by the government reference prices are either externally based on drug prices in other countries or internally based on domestic drug prices determined we study the effects of a change from external to internal reference pricing in denmark in 2005 we find that the reform led to substantial reductions in retail prices reference prices and patient co payments as well as to sizable decreases in overall producer revenues and health care expenditures the reform induced consumers to substitute away from branded drugs for which we estimate strong preferences the increase in consumer welfare due to the reform therefore depends on whether or not we take perceived quality differences into account in its calculation

transmission and generation investment in electricity markets the effects of market splitting and network fee regimes abstract we propose an equilibrium model that allows to analyze the long run impact of the electricity market design on transmission line expansion by the regulator and investment in generation capacity by private firms in liberalized electricity markets the model incorporates investment decisions of the transmission system operator and private firms in expectation of an energy only market and cost based redispatch in different specifications we consider the cases of one vs multiple price zones market splitting and analyze different approaches to recover network cost in particular lump sum generation capacity based and energy based fees in order to compare the outcomes of our multilevel market model with a first best benchmark we also solve the corresponding integrated planner problem using two test networks we illustrate that energy only markets can lead to suboptimal locational decisions for generation capacity and thus imply excessive network expansion market splitting heals these problems only partially these results are valid for all considered types of network tariffs although investment slightly differs across those regimes

linear complementarity models of nash cournot competition in bilateral and poolco power markets two cournot models of imperfect competition among electricity producers are formulated as mixed linear complementarity problems lcps and a simple example is presented to illustrate their application the two models simulate bilateral markets the models include a congestion pricing scheme for transmission but other transmission pricing approaches can also be represented in this framework the two models differ from each other in that one has no arbitrage between nodes of the network while in the other model arbitragers erase any noncost based differences in price the latter bilateral model turns out to be equivalent to a cournot model of a poolco the models differ from other cournot market models in that they include both of kirchhoff s laws via a dc approximation can include arbitragers possess unique solutions and are readily solved by efficient lcp algorithms the key assumption that permits their formulation as lcps is that each producer naively assumes that its output will not affect transmission prices

late stage pharmaceutical r d and pricing policies under two stage regulation 2016 elsevier b v we present a model combining the two regulatory stages relevant to the approval of a new health technology the authorisation of its commercialisation and the insurer s decision about whether to reimburse its cost we show that the degree of uncertainty concerning the true value of the insurer s maximum willingness to pay for a unit increase in effectiveness has a non monotonic impact on the optimal price of the innovation the firm s expected profit and the optimal sample size of the clinical trial a key result is that there exists a range of values of the uncertainty parameter over which a reduction in uncertainty benefits the firm the insurer and patients we consider how different policy parameters may be used as incentive mechanisms and the incentives to invest in r d for marginal projects such as those targeting rare diseases the model is calibrated using data on a new treatment for cystic fibrosis

a multiperiod generalized network flow model of the u s integrated energy system part ii simulation results this paper is the second of a two part paper and describes the application of a multiperiod generalized network flow model that is used to analyze the economic efficiencies of the energy movements from the coal and natural gas suppliers to the electric load centers providing a simulation tool that captures dynamics of and interdependencies between the coal natural gas and electricity networks the modeling approach mathematical formulation and modeling assumptions are presented in part i this sequel presents and discusses numerical results to illustrate the application of the model the model enables public and private decision makers to carry out comprehensive analyses of a wide range of issues related to the energy sector such as strategic planning economic impact assessment and different regulatory regimes

alternative systems of health care provision health care timothy besley and miguel gouveia rising costs of health care provision throughout the world have provoked a vigorous debate about the design of health care systems and the role of government in health care in countries that have predominantly social provision there are moves towards privatization and direct attempts to regulate prices in more market oriented systems rising costs seem to be resulting in a greater uninsured problem and this too is provoking demands for reform technological change will put constant pressure on health care systems public or private generating serious social choice problems however this must be seen in the context of a traditional commitment to providing a non trivial minimum level of health care to all members of society we discuss evidence from oecd countries from 1960 to 1990 then focus on more recent changes the central problems of market oriented systems are cost containment and the fact that significant segments of the population go uninsured most oecd countries have therefore chosen solutions where health care financing is socialized we present a simple political economy model to describe the conditions under which this will arise the hallmark of public provision is relative uniformity in access to health care this creates incentives for individuals to opt out of the public sector and to supplement what they can obtain through the state in addition it creates a significant commitment to redistribution through public provision rising costs strain the generosity of taxpayers we expect to see increased reliance on market solutions and moves towards multi tiered health systems that differentiate health care provisions made for different groups in society

the role of firm characteristics in pharmaceutical product launches this paper examines the determinants of new pharmaceutical launches since 1980 in the g7 nations using discrete time hazard models despite the obvious incentive to amortize the large sunk costs of drug development over many markets entry occurs in only 4 of the opportunities the results indicate that firm characteristics such as domestic status and experience in the local market are important in explaining product launches in addition to market characteristics also the interaction between the innovating firm and target country is a critical component of profitability new drugs are 1 5 times more likely to be launched in markets that share a border or a language of a drug company s country of headquarters even for multinational firms the effect of competition depends on the characteristics of both the potential entrant and the incumbents domestic entrants prefer to compete with domestic incumbents although this is an industry with the potential for ubiquitous licensing and low transportation costs the specific match quality between the innovating firm and market conditions remains an important determinant of entry

auditing the producer price index micro evidence from prescription pharmaceutical preparations from january 1984 through december 1989 the bureau of labor statistics bls price index for prescription pharmaceuticals grew at 9 09 per year using bls type laspeyres index procedures with monthly price and quantity data on all prescription pharmaceuticals sold by four u s pharmaceutical manufacturers accounting for 24 of industry domestic sales we find that the four company index increases at 6 68 per year when we employ a divisia price index with smoothed weights incorporating new goods the index grows 6 03 per year why does the bls index grow 50 more rapidly than the divisia index that mystery is the focal point of our article

the political economy of the pharmaceutical industry e conomicsis a practical science since its inception as an independent discipline it has probed the major policy issues of the day the topics that aroused the interests of its practitioners have generally been those that presented government officials with critical choices the modern literature on the economics of the pharmaceutical industry is no exception this body of material originated with the investigations of the kefauver committee in late 1959 public interest was aroused by the spectacle of confrontation between committee and industry the record made by this committee and its successors grew to tens of thousands of pages as claims and counterclaims were offered regarding industry conduct and performance the primary line of attack concerned pharmaceutical prices and profits the committee demonstrated that prices generally exceeded direct costs of manufacturing for 22 major pharmaceutical firms in 1958 costs of goods sold were merely 32 percent of total sales u s senate report 1961 p 31 the committee argued that this fact alone demonstrated the presence of monopoly power while the substantial difference between revenues and production costs permitted high expenditures on research and development it also paid for even higher selling outlays moreover reported rates of return after taxes during this period on the order of 21 to 22 percent exceeded twice the average for all manufacturing the industry replied that on the contrary prices were low relative to the value afforded consumers and high returns on successful products were required to balance the losses from the large numbers of unsuccessful ones the relevant concept of marginal costs according to the industry position must include the costs of developing and marketing new products and therefore prices were not excessive at all although it admitted earning substantial profits the industry argued that without these returns research outlays would be limited and the number of new drugs reduced the committee countered that little of social value arose from industry research molecules were manipulated and the new drugs that resulted were therapeutically similar to those already on the market indeed it suggested that much