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The strategic interaction between firms and formulary committees: effects on the prices of new drugs

Garcia-Alonso, Maria D C, Garcia-Marinoso, Begoña (2008) The strategic interaction between firms and formulary committees: effects on the prices of new drugs. Journal of Health Economics, 27 Iss (2). pp. 377-404. ISSN 0167-6296. (doi:10.1016/j.jhealeco.2007.06.003) (KAR id:7701)

Abstract

We study the strategic interaction between the pricing decisions of a pharmaceutical firm and the reimbursement decisions of a government agency which grants reimbursement rights to patients for whom new drugs are most cost-effective. If the reimbursement decision precedes pricing, the agency only reimburses some patients if the drug’s private and public health benefits diverge. This is, there are consumption externalities and the variable cost of the drug exceeds the alternative’s. Contrarily, if the firm can commit to a price before reimbursement, a strategic effect implies that by setting a sufficiently high price, the firm can make the agency more willing to reimburse than without commitment.

Item Type: Article
DOI/Identification number: 10.1016/j.jhealeco.2007.06.003
Uncontrolled keywords: drug formularies; subsidies
Subjects: H Social Sciences
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Maria Garcia-Alonso
Date Deposited: 14 Mar 2009 11:01 UTC
Last Modified: 16 Nov 2021 09:45 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/7701 (The current URI for this page, for reference purposes)

University of Kent Author Information

Garcia-Alonso, Maria D C.

Creator's ORCID: https://orcid.org/0000-0002-4457-3332
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