Effects of the German reference drug program on ex-factory prices of prescription drugs: a panel data approach.
This paper examines effects of the German social health insurance system's reference drug program (RDP) for prescription drugs on ex-factory prices. Moreover, we analyze whether manufacturers adapt prices of their products that are not subject to reference pricing as a consequence of changes in reference prices of their products that are subject to reference pricing. We use econometric panel data methods based on a large panel data set of nearly all German prescription drugs on a monthly basis between October 1994 and July 2005. They provide information on ex-factory prices, reference prices, manufacturers, type of prescription drug, and market entries and exits. Our results show that there is no full price adjustment: A 1%-change in reference prices leads to a 0.3%-change in market prices. Price adjustment, however, is fast - it mostly happens in the first month. Furthermore, the first introduction of a reference price reduces market prices of the affected products by approximately 7%. Finally, we observe a significant time effect that is positive in the market without reference prices and negative in the market with reference prices.
Augurzky
Boris
B
RWI Essen, Essen, Germany. augurzky@rwi-essen.de
Göhlmann
Silja
S
Gress
Stefan
S
Wasem
Jürgen
J
D003132:Commerce / Q000191:economics*; D003363:Cost Control; D016527:Drug Costs / Q000592:standards*; D004345:Drug Industry; D004465:Economic Competition; D017850:Economics, Pharmaceutical / Q000706:statistics & numerical data; D005858:Germany; D017059:Models, Econometric; D009313:National Health Programs; D011306:Prescription Fees / Q000592:standards*