title: Regulation of pharmaceutical prices: evidence from a reference price reform in Denmark.
abstract: Reference price systems for prescription drugs constitute widely adopted cost containment tools. Under these regimes, patients co-pay a fraction of the difference between a drug's pharmacy retail price and a reference price that is set by the government. Reference prices are either externally (based on drug prices in other countries) or internally (based on domestic drug prices) determined. We study the effects of a change from external to internal reference pricing in Denmark in 2005. We find that the reform led to substantial reductions in retail prices, reference prices and patient co-payments as well as to sizable decreases in overall producer revenues and health care expenditures. The reform induced consumers to substitute away from branded drugs for which we estimate strong preferences. The increase in consumer welfare due to the reform therefore depends on whether or not we take perceived quality differences into account in its calculation.
authors.affiliation: Department of Business Administration, University of Zurich, Plattenstr. 14, 8032 Zurich, Switzerland; Centre for European Economic Research, Mannheim; Institute for the Study of Labor, Bonn; Copenhagen Business School, Department of Innovation and Organizational Economics, Kilevej 14A, 2000 Frederiksberg, Denmark. Electronic address: ulrich.kaiser@business.uzh.ch.
authors.forename: Ulrich
authors.initials: U
authors.lastname: Kaiser
authors.affiliation: University of Melbourne, Melbourne Institute of Applied Economic and Social Research, Level 5 - Faculty of Business and Economics Building - Office 528, 111 Barry Street, Victoria 3010, Australia. Electronic address: susan.mendez@unimelb.edu.au.
authors.forename: Susan J
authors.initials: SJ
authors.lastname: Mendez
authors.affiliation: Centre for European Economic Research, Mannheim; Copenhagen Business School, Department of Innovation and Organizational Economics, Kilevej 14A, 2000 Frederiksberg, Denmark; Centre for Economic Policy Research, London. Electronic address: thr.ino@cbs.dk.
authors.forename: Thomas
authors.initials: T
authors.lastname: Rønde
authors.affiliation: Department of Business Administration, University of Zurich, Plattenstr. 14, 8032 Zurich, Switzerland; DIW Berlin, Department Firms and Markets, Mohrenstr. 58, 10117 Berlin, Germany; University of Zurich, Department of Business Administration. Electronic address: hullrich@diw.de.
authors.forename: Hannes
authors.initials: H
authors.lastname: Ullrich
mesh_terms: D002755:Choice Behavior; D003363:Cost Control / Q000331:legislation & jurisprudence / Q000379:methods; D017047:Cost Sharing / Q000191:economics / Q000331:legislation & jurisprudence; D003718:Denmark; D016568:Drugs, Generic / Q000191:economics* / Q000627:therapeutic use; D017850:Economics, Pharmaceutical / Q000331:legislation & jurisprudence*; D006801:Humans; D019161:Hydroxymethylglutaryl-CoA Reductase Inhibitors / Q000191:economics* / Q000627:therapeutic use; D007356:Insurance, Pharmaceutical Services / Q000191:economics* / Q000331:legislation & jurisprudence; D055553:Prescription Drugs / Q000191:economics* / Q000627:therapeutic use; D011306:Prescription Fees / Q000331:legislation & jurisprudence*
chemical_list: D016568:Drugs, Generic; D019161:Hydroxymethylglutaryl-CoA Reductase Inhibitors; D055553:Prescription Drugs
keywords: Co-payments; Consumer welfare; Pharmaceutical markets; Reference pricing; Regulation