Constantly rising expenditures for pharmaceuticals require government intervention in firms' pricing decisions. To this … the introduction of a reference price leads to lower equilibrium prices and induces fiercer competition between firms …

-patent pharmaceuticals. We present a theoretical model with price-sensitive and loyal consumers that shows that a decrease in the reference … price affects the consumers' co-payments in a non-monotonic way: For high reference prices, a marginally lower reference … price may lead to lower co-payments. However, for low reference prices a further reduction may result into higher consumer …