Working Paper: CEPR ID: DP18497
Authors: Mika Kortelainen; Jaakko Markkanen; Markku Siikanen; Otto Toivanen
Abstract: Quasi-experimental evidence on the effectiveness of price regulation policies in curbing pharmaceutical expenditure is scarce. We analyze widely utilized generic substitution and reference price policies using data from the Nordic countries. Constructing treatment and control groups by matching data across countries by active ingredientsand employing difference-in-difference methods on market-level observations, we find that expenditure per dose decreases by 40% moving from the laxest to the strictest regime. Prices decrease less: Reallocation of demand to cheaper products likely explains the difference. We find no adverse effects on pharmaceutical availability and non-existent or positive quantity effects.
Keywords: pharmaceutical expenditure; pharmaceutical pricing; generic competition; reference pricing; regulation
JEL Codes: I11; I18; H51; L51; L65; C23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strictest price regulation regime (K23) | expenditure per dose (H51) |
| Finnish move in 2009 from GS to IRP (F29) | expenditure (H72) |
| Denmark's transition to ERP (O52) | expenditure per dose (H51) |
| strictest price regulation regime (K23) | demand reallocation to cheaper products (D61) |
| expenditure per dose (H51) | pharmaceutical availability (L65) |