HUI Working Papers, HUI Research
EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?
() and Miyase Yesim Köksal
Abstract: Given the cost of trade and availability of
pharmaceuticals, the driving force for parallel trade is the price
difference between the source (exporting) and the destination (importing)
country. An increase in the price difference or in the availability of
pharmaceuticals for parallel trade should increase price competition in the
destination country. Using 2003-2007 data from Sweden we investigated
whether EU enlargement in 2004, when new countries with low pharmaceutical
prices joined the EU, increased competition from parallel imports. Drugs
facing competition from parallel imports are found to have on average 17%
to 21% lower prices than they would have had if they had never faced such
competition. But, contrary to expectation, EU enlargement is not found to
have increased this effect, which might be explained by derogations and
changes in consumer perceptions of parallel imports.
Keywords: EU enlargement; parallel trade; pharmaceuticals; price competition; (follow links to similar papers)
JEL-Codes: I11; L51; L65; (follow links to similar papers)
28 pages, March 27, 2012
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