Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 777: Price and welfare effects of a pharmaceutical substitution reform
David Granlund ()
Additional contact information
David Granlund: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Abstract: The price effects of the Swedish pharmaceutical substitution reform are analyzed using data for a panel of all pharmaceutical product sold in Sweden in 1997—2007. The price reduction due to the reform was estimated to average 10% and was found to be significantly larger for brand name pharmaceuticals than for generics. The results also imply that the reform amplified the effect of generic entry has on brand-name prices by a factor of ten. Results of a demand-estimation imply that the price reductions increased total pharmaceutical consumption by 8% and consumer welfare by SEK 2.7 billion annually.
Keywords: drugs; generic competition; equivalent variation; demand estimation
29 pages, August 13, 2009
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