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Session: The effects of reference pricing in pharmaceutical markets
Room: Congress Hall A
Time: Fri 08:30-09:45

Presenter: Claudio Jommi (Bocconi University. Centre for Research on Health Care Management (CERGAS))

Abstract

The purpose of this paper is twofold. The first objective is to test the hypothesis that the introduction of the Italian generic reference price (RP) has caused a demand reallocation to products still under patent protection. Although the hypothesis is implicitly made in many theoretical and policy papers, it has surprisingly received little attention by the existing empirical literature. Empirically, the main challenge here is to disentangle the natural trend towards the prescription of new drugs from the direct causal effect of the RP. Second, to describe quantitatively how firms' optimal pricing strategies have been affected by the RP and how the dynamics of the reimbursement level, set at the minimum price, is linked with pricing and entry patterns of pharmaceutical products, particularly generic drugs. We consider a total of 1678 pharmaceutical packs observed for 126 months, from 1999 till 2009. Therapeutic groups included: A02 (PPI and H2 antagonists), C07, C08, C09, C10 (cardiovascular system) and N06 (antidepressants), for a total number of observations over 100,000. We perform a Difference-in-Difference (DD) analysis of revenues, quantities and prices, comparing the groups of drugs subject to RP with therapeutically similar products still under patent protection. We also show that commonly used linear DD models might be misleading, performing further checks on the significance of the relevant coefficients.

Key Terms

Pharmaceuticals, Reference Pricing, Italy

Authors:

Claudio Jommi (Bocconi University. Centre for Research on Health Care Management (CERGAS)) , Patrizio Armeni (Bocconi University. Centre for Research on Health Care Management (CERGAS)) and Simone Ghislandi (Bocconi University. Department of Institutional Analysis and Public Management)

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