Price competition in pharmaceuticals – a panel data analysis of the Finnish pharmaceutical market
Valkama, Max (2022)
Valkama, Max
2022
Julkaisu on tekijänoikeussäännösten alainen. Teosta voi lukea ja tulostaa henkilökohtaista käyttöä varten. Käyttö kaupallisiin tarkoituksiin on kielletty.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2022051535547
https://urn.fi/URN:NBN:fi-fe2022051535547
Tiivistelmä
Reference pricing is one of the most common regulatory tools used to promote competition between pharmaceutical substances. Finland introduced its reference price system in 2009 in an effort to activate price competition between medicines and to control the rising costs of health care. This thesis studies the effects of increased competition on original and generic medicines within this system.
This study uses monthly panel data of medicines included in the Finnish reference price system between the years 2009 and 2021. Using several two-way fixed effects estimators and accounting for the possible endogeneity problem which is often present in price-concentration studies, I provide evidence of significant price effects of increased competition on generic medicines. The prices of generic medicines are found to decrease by 63-75% when the number of interchangeable medicines increases from
one to ten. Prices of generic medicines are also found to react to increased competition by medicines with the same active ingredient but with different packaging sizes, strengths, or routes of administration. Original medicines are found to react to increased competition as well, but less so than generics, and the results are more ambiguous. Furthermore, prices of both generic and original medicines appear to be characterized by constant elasticities.
This study uses monthly panel data of medicines included in the Finnish reference price system between the years 2009 and 2021. Using several two-way fixed effects estimators and accounting for the possible endogeneity problem which is often present in price-concentration studies, I provide evidence of significant price effects of increased competition on generic medicines. The prices of generic medicines are found to decrease by 63-75% when the number of interchangeable medicines increases from
one to ten. Prices of generic medicines are also found to react to increased competition by medicines with the same active ingredient but with different packaging sizes, strengths, or routes of administration. Original medicines are found to react to increased competition as well, but less so than generics, and the results are more ambiguous. Furthermore, prices of both generic and original medicines appear to be characterized by constant elasticities.