External referencing and pharmaceutical price negotiation

Begoña Garcia Mariñoso (1) , Izabela Jelovac (2) , Pau Olivella (3)

1 CMT - Comisión del Mercado de las Telecomunicaciones
2 GATE - Groupe d'analyse et de théorie économique
3 CODE - Center for the study of the Organizations and Decisions in Economics

External referencing (ER) imposes a price cap for pharmaceuticals based on prices of identical products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm while a home country (H) can either negotiate independently or implement ER based on the foreign price. We show that country H always prefers ER if (i) it can condition ER on the drug being subsidized in the foreign country and (ii) copayments are higher in H than in F. H's preference is
reinforced when the difference between country copayments is large and/or H's population is small. External referencing by H always harms F if (ii) holds, but less so if (i) holds.

Mots clés: pharmaceuticals; external referencing; price negotiation

Domaines: Economies et finances

Begoña Garcia Mariñoso, Izabela Jelovac, Pau Olivella. External referencing and pharmaceutical price negotiation. Health Economics, 2011, 20 (6), pp. 737-756. ⟨10.1002/hec.1630⟩. ⟨halshs-00303682⟩