Drug launch timing and international reference pricing

Abstract

This paper analyzes the timing decisions of pharmaceutical firms to launch a new drug in countries involved in international reference pricing. We show three important features of launch timing when all countries reference the prices in all other countries and in all previous periods of time. First, there is no withdrawal of drugs in any country and in any period of time. Second, there is no strict incentive to delay the launch of a drug in any country. Third, whenever the drug is sold in a country, it is also sold in all countries with larger willingness to pay. We then show that the three results do not hold when the countries only reference a subset of all countries. The first two results do not hold when the reference is on the last period prices only