title: The welfare impact of parallel imports: a structural approach applied to the German market for oral anti-diabetics.
abstract: We investigate the welfare impact of parallel imports using a large panel dataset containing monthly information on sales, ex-factory prices, and further product characteristics for all 649 anti-diabetic drugs sold in Germany between 2004 and 2010. We estimate a two-stage nested logit model of demand, and on the basis of an oligopolistic model of multi-product firms, we then recover the marginal costs and markups. We finally evaluate the effect of the parallel imports' policy by calculating a counterfactual scenario without parallel trade. According to our estimates, parallel imports reduce the prices for patented drugs by 11% and do not have a significant effect on prices for generic drugs. This amounts to an increase in the demand-side surplus by €19 million per year (or €130 million in total), which is relatively small compared with the average annual market size of around €227 million based on ex-factory prices. The variable profits for the manufacturers of original drugs from the German market are reduced by €18 million (or 37%) per year when parallel trade is allowed, yet only one third of this difference is appropriated by the importers.
authors.affiliation: Deutsches Institut für Wirtschaftsforschung (DIW Berlin), Berlin, Germany; Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine-Universität, Düsseldorf, Germany.
authors.forename: Tomaso
authors.initials: T
authors.lastname: Duso
authors.forename: Annika
authors.initials: A
authors.lastname: Herr
authors.forename: Moritz
authors.initials: M
authors.lastname: Suppliet
mesh_terms: D000284:Administration, Oral; D017047:Cost Sharing; D016527:Drug Costs / Q000706:statistics & numerical data; D004345:Drug Industry / Q000191:economics* / Q000458:organization & administration; D004467:Economics; D005858:Germany / Q000453:epidemiology; D006301:Health Services Needs and Demand / Q000191:economics; D006801:Humans; D007004:Hypoglycemic Agents / Q000191:economics*; D018803:Models, Economic; D010330:Patents as Topic
chemical_list: D007004:Hypoglycemic Agents
keywords: anti-diabetic drugs; parallel imports; pharmaceuticals; structural models