Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 921: Squeezing the last drop out of your suppliers: an empirical study of market-based purchasing policies for generic pharmaceuticals
Mats A. Bergman (), David Granlund () and Niklas Rudholm ()
Additional contact information
Mats A. Bergman: Department of Economics, Södertörn University, Postal: Department of Economics, Södertörn University, 141 89 Huddinge, Sweden
David Granlund: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Niklas Rudholm: Department of Economics, Postal: Dalarna University, SE-781 88 Borlänge, 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%.
Keywords: Pharmaceutical industry; generic competition; generic drugs; brand-name drugs
38 pages, February 2, 2016
Full text files
175781_ues921.pdf
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