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No 49:
Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?

David Granlund () and Miyase Yesim Köksal

Abstract: What has been the effect of competition from parallel imports on prices of locally-sourced onpatent drugs? Did the 2002 Swedish mandatory substitution reform increase this competition? To answer these questions, we carried out difference-in-differences estimation on monthly data for a panel of all on-patent prescription drugs sold in Sweden during the 40 months from January 2001 through April 2004. On average, facing competition from parallel imports caused a 15-17% fall in price. While the reform increased the effect of competition from parallel imports, it was only by 0.9%. The reform, however, did increase the effect of therapeutic competition by 1.6%.

Keywords: parallel imports; pharmaceutical drugs; price competition; reference pricing; therapeutic competition; (follow links to similar papers)

JEL-Codes: I11; L51; L65; (follow links to similar papers)

32 pages, April 1, 2011

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