Pricing and welfare implications of parallel imports in the pharmaceutical industry.
In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients' level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare.
Jelovac
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CREPP-University of Liege, Boulevard de Rectorat 7(B31), 4000 Liege, Belgium.
Bordoy
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D016527:Drug Costs / Q000706:statistics & numerical data*; D004345:Drug Industry / Q000191:economics* / Q000331:legislation & jurisprudence*; D004465:Economic Competition; D005252:Fees, Pharmaceutical / Q000706:statistics & numerical data; D006301:Health Services Needs and Demand / Q000191:economics; D006801:Humans; D038622:Internationality; D017059:Models, Econometric; D010330:Patents as Topic; D012946:Social Welfare / Q000191:economics* / Q000331:legislation & jurisprudence*