The welfare impact of parallel imports: A structural approach applied to the German market for oral anti-diabetics
We investigate the welfare impact of parallel imports using a large panel data set containing monthly information on sales, ex-factory prices, and further product characteristics for all 700 anti-diabetic drugs sold in Germany between 2004 and 2010. We estimate a two-stage nested logit model of demand and, based on an oligopolistic model of multi- product firms, we then recover the marginal costs and markups. We finally evaluate the effect of the parallel imports' policy by calculating a counter-factual scenario without parallel trade. According to our estimates, parallel imports reduce the prices for patented drugs by 11% and do not have a significant effect on prices for generic drugs. This amounts to an increase in the demand-side surplus by e19 million per year (or e130 million in total) which is relatively small compared to the average annual market size of around e227 million based on ex-factory prices. The variable profits for the manufacturers of original drugs from the German market are reduced by e18 million (or 37%) per year when parallel trade is allowed, yet only one third of this difference is appropriated by the importers.
Year of publication: |
2014
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Authors: | Duso, Tomaso ; Herr, Annika ; Suppliet, Moritz |
Publisher: |
Düsseldorf : Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) |
Subject: | parallel imports | pharmaceuticals | structural models | anti-diabetic drugs |
Saved in:
freely available
Series: | DICE Discussion Paper ; 137 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
ISBN: | 978-3-86304-136-6 |
Other identifiers: | 782429289 [GVK] hdl:10419/95875 [Handle] RePEc:zbw:dicedp:137 [RePEc] |
Classification: | I11 - Analysis of Health Care Markets ; I18 - Government Policy; Regulation; Public Health ; L13 - Oligopoly and Other Imperfect Markets ; L51 - Economics of Regulation |
Source: |
Persistent link: https://www.econbiz.de/10010335860