Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 105: Reforming the Swedish pharmaceuticals market – consequences for costs per defined daily dose

Mats Bergman , David Granlund and Niklas Rudholm ()
Additional contact information
Mats Bergman: HUI Research, Postal: SE-10329 Stockholm, Sweden and Södertörn University, SE-14189 Huddinge, Sweden
David Granlund: Umeå University, Postal: SE-90187 Umeå, Sweden
Niklas Rudholm: HUI Research, Postal: SE-10329 Stockholm, Sweden and Dalarna University, SE-79188 Falun, Sweden

Abstract: Introduction: In 2009, the Swedish pharmaceuticals market was reformed. One of the stated policy goals was to achieve low costs for pharmaceutical products dispensed in Sweden. Methods: Prices and sales data for off-patent brand-name and generic pharmaceuticals have been collected, and a log-linear regression model was used to estimate how the policy changes affected the cost per defined daily dose. Results: The estimated effect is a 19 percent cost reduction per defined daily dose at the retail level and a 35 percent reduction in the prices at the wholesale level (pharmacies' purchase prices). The empirical results suggest that half of the retail-level price reduction is due to the introduction of a price cap for products going off patent and half is due to other components of the reform. Measured at the wholesale level the latter effect is larger than the former. Conclusion: The reforms reduced the cost per defined daily dose for consumers while being advantageous also for the pharmacies, who saw their retail margins increase due to the reform. However, pharmaceutical firms supplying off-patent pharmaceuticals experienced a clear reduction in the price received for their products.

Keywords: pharmaceutical industry; national pharmacy monopoly; pharmacy deregulation; competition; generics; pricing

JEL-codes: D80; D83; I11; L65

14 pages, June 5, 2014

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