On the relationship between the negotiated prices of pharmaceuticals and the patients' co-payment

In this paper, we give a new insight on the relationship between the patients' co-payment for buying pharmaceuticals and the price of a patented pharmaceutical. We consider that the price of a pharmaceutical is the outcome of a negotiation between a health authority and a pharmaceutical monopoly producer. We use a model based on bargaining theory to represent this negotiation. The negotiated price is shown to be increasing in the degree of the patients' co-payment. This positive relationship is thus opposite to the negative one prevailing when the price is set by a monopoly without any negotiation. We further analyze the negotiation on the co-payment itself, and show that the optimal degree of the negotiated co-payment is the lowest one.