The drug bargaining game: pharmaceutical regulation in Australia.
Many countries, including Australia, regulate the price consumers pay for pharmaceuticals. In this paper, the Australian Pharmaceutical Benefits Scheme (PBS) is modelled as a multi-stage game played between the regulator and pharmaceutical firms. Conditions are derived under which vertically differentiated firms are regulated and a number of issues are discussed. These include efficiency, regulated firm profitability, leakage, and price discrimination. An extension examines the introduction of new drugs and concludes that if all the benefits of a new drug are to be realised, then existing agreements and transfers (per-unit subsidies) need to be renegotiated.
Wright
Donald J
DJ
Department of Economics, Faculty of Economics and Business, University of Sydney, NSW 2006 Sydney, Australia. don.wright@econ.usyd.edu.au
D001315:Australia; D016527:Drug Costs / Q000331:legislation & jurisprudence*; D004345:Drug Industry / Q000331:legislation & jurisprudence*; D004465:Economic Competition; D005716:Game Theory; D033161:Government Regulation; D007182:Income