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

Garcia-Alonso, Maria D C and 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. (Full text available)

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http://dx.doi.org/10.1016/j.jhealeco.2007.06.003

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
Uncontrolled keywords: drug formularies; subsidies
Subjects: H Social Sciences
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Maria Garcia-Alonso
Date Deposited: 14 Mar 2009 11:01
Last Modified: 30 Jan 2015 10:27
Resource URI: https://kar.kent.ac.uk/id/eprint/7701 (The current URI for this page, for reference purposes)
ORCiD (Garcia-Alonso, Maria D C): https://orcid.org/0000-0002-4457-3332
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