Parallel Imports of Pharmaceutical Products in the European Union
The point of parallel imports of pharmaceuticals is arbitrage between countries with different prices. For several years, an important issue in the European Union (EU) has been the evident conflict between differing price regulations in the member...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/07/1551961/parallel-imports-pharmaceutical-products-european-union http://hdl.handle.net/10986/19584 |
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okr-10986-195842021-04-23T14:03:43Z Parallel Imports of Pharmaceutical Products in the European Union Ganslandt, Mattias Maskus, Keith E. AVERAGE PRICES BASE YEAR BENCHMARK COMMON MARKET CONSUMERS CONVERGENCE HYPOTHESIS COST INCREASES DEMAND FUNCTIONS ECONOMETRIC ANALYSIS EMPIRICAL ANALYSIS EQUILIBRIUM EXCLUSIVE RIGHTS EXPORT MARKETS EXPORTS GDP HOME MARKET HOME MARKETS IMPORTS INCOME INCOME LEVELS INDUSTRIAL ECONOMICS MARGINAL COST MARGINAL REVENUE MARGINAL UTILITY MARKET INTEGRATION MARKETING MONOPOLIES PATENTS POLICY MAKERS PRICE CEILINGS PRICE CHANGES PRICE COMPARISONS PRICE CONTROL PRICE CONTROLS PRICE EFFECT PRICE REGULATION PROPERTY RIGHTS SALES SUBSTITUTION TOTAL SALES TRADEMARKS UTILITY FUNCTION WELFARE EFFECTS WHOLESALE PRICES WHOLESALERS The point of parallel imports of pharmaceuticals is arbitrage between countries with different prices. For several years, an important issue in the European Union (EU) has been the evident conflict between differing price regulations in the member states, on the one hand, and the consequences of parallel trade, on the other. In the EU, so long as the manufacturer has placed the good on the market voluntarily, the principle of free movement of goods allows individuals, or firms within the EU to trade goods across borders, without the consent of the producer. In this context, the authors study the effects of parallel trade in the pharmaceutical industry. They develop a model in which an original manufacturer competes in its home market with parallel-importing firms. The two key hypotheses in their theoretical analysis are these: First, if the potential for parallel imports is unlimited, the manufacturer chooses deterrence, and international prices converge. Second, with endogenously limited arbitrage, the manufacturing firm accommodates, and the price in the home market falls as the volume of parallel trade rises. The authors test their hypotheses on data from the Swedish market for 1995-98. Before 1995, Sweden prohibited parallel imports of pharmaceutical products, but entry into the EU, on January 1, 1995, required Sweden to allow them. Simple empirical tests favor the accommodation hypothesis with a time lag. Using data from Sweden, the authors find that the prices of drugs, subject to competition from parallel imports increased less than those for other drugs between 1995 and 1998. Roughly, three-fourths of this effect can be attributed to the lower prices of parallel imports, and one-fourth to lower prices charged by the manufacturing firm. Econometric analysis finds that rents to parallel importers (or resource costs in parallel trade) could be more than the gain to consumers from lower prices. 2014-08-21T19:06:00Z 2014-08-21T19:06:00Z 2001-07 http://documents.worldbank.org/curated/en/2001/07/1551961/parallel-imports-pharmaceutical-products-european-union http://hdl.handle.net/10986/19584 English en_US Policy Research Working Paper;No. 2630 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia European Union |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AVERAGE PRICES BASE YEAR BENCHMARK COMMON MARKET CONSUMERS CONVERGENCE HYPOTHESIS COST INCREASES DEMAND FUNCTIONS ECONOMETRIC ANALYSIS EMPIRICAL ANALYSIS EQUILIBRIUM EXCLUSIVE RIGHTS EXPORT MARKETS EXPORTS GDP HOME MARKET HOME MARKETS IMPORTS INCOME INCOME LEVELS INDUSTRIAL ECONOMICS MARGINAL COST MARGINAL REVENUE MARGINAL UTILITY MARKET INTEGRATION MARKETING MONOPOLIES PATENTS POLICY MAKERS PRICE CEILINGS PRICE CHANGES PRICE COMPARISONS PRICE CONTROL PRICE CONTROLS PRICE EFFECT PRICE REGULATION PROPERTY RIGHTS SALES SUBSTITUTION TOTAL SALES TRADEMARKS UTILITY FUNCTION WELFARE EFFECTS WHOLESALE PRICES WHOLESALERS |
| spellingShingle |
AVERAGE PRICES BASE YEAR BENCHMARK COMMON MARKET CONSUMERS CONVERGENCE HYPOTHESIS COST INCREASES DEMAND FUNCTIONS ECONOMETRIC ANALYSIS EMPIRICAL ANALYSIS EQUILIBRIUM EXCLUSIVE RIGHTS EXPORT MARKETS EXPORTS GDP HOME MARKET HOME MARKETS IMPORTS INCOME INCOME LEVELS INDUSTRIAL ECONOMICS MARGINAL COST MARGINAL REVENUE MARGINAL UTILITY MARKET INTEGRATION MARKETING MONOPOLIES PATENTS POLICY MAKERS PRICE CEILINGS PRICE CHANGES PRICE COMPARISONS PRICE CONTROL PRICE CONTROLS PRICE EFFECT PRICE REGULATION PROPERTY RIGHTS SALES SUBSTITUTION TOTAL SALES TRADEMARKS UTILITY FUNCTION WELFARE EFFECTS WHOLESALE PRICES WHOLESALERS Ganslandt, Mattias Maskus, Keith E. Parallel Imports of Pharmaceutical Products in the European Union |
| geographic_facet |
Europe and Central Asia European Union |
| relation |
Policy Research Working Paper;No. 2630 |
| description |
The point of parallel imports of
pharmaceuticals is arbitrage between countries with
different prices. For several years, an important issue in
the European Union (EU) has been the evident conflict
between differing price regulations in the member states, on
the one hand, and the consequences of parallel trade, on the
other. In the EU, so long as the manufacturer has placed the
good on the market voluntarily, the principle of free
movement of goods allows individuals, or firms within the EU
to trade goods across borders, without the consent of the
producer. In this context, the authors study the effects of
parallel trade in the pharmaceutical industry. They develop
a model in which an original manufacturer competes in its
home market with parallel-importing firms. The two key
hypotheses in their theoretical analysis are these: First,
if the potential for parallel imports is unlimited, the
manufacturer chooses deterrence, and international prices
converge. Second, with endogenously limited arbitrage, the
manufacturing firm accommodates, and the price in the home
market falls as the volume of parallel trade rises. The
authors test their hypotheses on data from the Swedish
market for 1995-98. Before 1995, Sweden prohibited parallel
imports of pharmaceutical products, but entry into the EU,
on January 1, 1995, required Sweden to allow them. Simple
empirical tests favor the accommodation hypothesis with a
time lag. Using data from Sweden, the authors find that the
prices of drugs, subject to competition from parallel
imports increased less than those for other drugs between
1995 and 1998. Roughly, three-fourths of this effect can be
attributed to the lower prices of parallel imports, and
one-fourth to lower prices charged by the manufacturing
firm. Econometric analysis finds that rents to parallel
importers (or resource costs in parallel trade) could be
more than the gain to consumers from lower prices. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Ganslandt, Mattias Maskus, Keith E. |
| author_facet |
Ganslandt, Mattias Maskus, Keith E. |
| author_sort |
Ganslandt, Mattias |
| title |
Parallel Imports of Pharmaceutical Products in the European Union |
| title_short |
Parallel Imports of Pharmaceutical Products in the European Union |
| title_full |
Parallel Imports of Pharmaceutical Products in the European Union |
| title_fullStr |
Parallel Imports of Pharmaceutical Products in the European Union |
| title_full_unstemmed |
Parallel Imports of Pharmaceutical Products in the European Union |
| title_sort |
parallel imports of pharmaceutical products in the european union |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/07/1551961/parallel-imports-pharmaceutical-products-european-union http://hdl.handle.net/10986/19584 |
| _version_ |
1764440085547188224 |