Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 831: EU Enlargement, Parallel Trade and Price Competition in Pharmaceuticals - What’s to Blame? Derogation or Perception?
David Granlund () and Miyase Yesim Köksal ()
Additional contact information
David Granlund: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Miyase Yesim Köksal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Postal: SE-405 30 Gothenburg, Sweden
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
28 pages, September 16, 2011
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