, David Granlund
and Niklas Rudholm
Mats Bergman: HUI Research, Postal: SE-10329 Stockholm, Sweden and Södertörn University, SE-14189 Huddinge, Sweden
David Granlund: Umeå University, Postal: SE-90189 Umeå, Sweden
Niklas Rudholm: HUI Research, Postal: SE-10329 Stockholm, Sweden and Dalarna University, SE-79188 Falun, Sweden
Abstract: We study the effect of the degree of exclusivity for the lowest bidder on the average price of generic pharmaceuticals in the short and long terms. Our results indicate that a 1-percentage-point gain in market share of the lowest bidder reduces average costs by 0.3% in the short term and 0.8% in the long term, but also reduces the number of firms by 1%. We find that reducing the number of firms has a strong positive (and hence counteracting) effect on average prices, i.e., a 1% reduction raises prices by approximately 1%.
38 pages, February 1, 2016
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