Externalities of national pharmaceutical policy when markets are integrated through parallel trade

This paper studies externalities of nationally determined cost-sharing systems, in particular coinsurance rates (patients pay a percentage of the price), under pharmaceutical parallel trade, i.e. trade outside the manufacturer's authorized distribution channel, in a two-country model with a vertical distributor relationship. Parallel trade generates a price-decreasing competition effect in the destination country and a price-increasing double marginalization effect in the source country. An increase of the coinsurance rates in the destination country of the parallel import mitigates the double marginalization effect in the source country. An increase of the coinsurance rate in the source country reinforces the competition effect in the destination country

Pharmaceutical regulation at the wholesale level and parallel trade

This paper studies the effect of pharmaceutical regulation at the wholesale level, if markets are integrated by parallel trade, i.e. trade outside the manufacturer´s authorized distribution channel. In particular, maximum wholesale margins, a restriction of pricing by the intermediary, and mandatory rebates, a restriction of the pricing by the manufacturer, are analyzed with respect to their effect on drug prices, quantities, and public pharmaceutical expenditure. Maximum wholesale margins enhance the manufacturer´s ability to reduce competition from parallel trade in the destination country by increasing wholesale prices. In a symmetric equilibrium, maximum wholesale margins of both countries partly offset each other. Mandatory rebates may be a policy alternative, as they exhibit a reinforcing effect with respect to drug prices

External reference pricing and the choice of country baskets and pricing rules

This paper models different external reference pricing schemes - a price cap based on the drug price in one or two countries and on the minimum or average drug price - in a three-country framework. It studies the choice of external reference pricing schemes in one country as well as its effect on welfare in the other countries, the manufacturer´s export decision, and the incentives for the other countries to also adopt an external reference pricing scheme. Depending on market size in the country adopting external reference pricing and market size difference of the other two countries, welfare is highest under the minimum price-rule or under the average price-rule. External reference pricing increases the drug price and decreases welfare in the other countries. If the market size in the country adopting an external reference pricing scheme is sufficiently large, the manufacturer does not export to the other countries. There is the incentive for the other countries also adopt external reference pricing

Minimum Quality Standards and Non-Compliance

This paper studies the effect of non-compliance with a minimum quality standard on prices, quality, and welfare in a vertical differentiation model. Non-compliance with a minimum quality standard by a low-quality firm reduces quality levels of both firms, increases the price for the high-quality product, decreases the price for the low-quality product, and shifts demand from the low-quality to the high-quality firm. Under non-compliance, an increase in the standard increases the quality difference, increases the price difference, and shifts demand from the high-quality to the low-quality firm. Stricter government enforcement decreases the quality level of the low-quality firm, increases the price of the high-quality product and shifts demand from the low-quality firm to the high-quality firm. Non-compliance of the low quality firm increases profits for both firms, reduces consumer surplus and increases or decreases welfare depending on the market size, the effect of quality levels of the externality, the detection probability, and the minimum quality level

Minimum quality standards and exports

This paper studies the interaction of a minimum quality standard and exports in a vertical product differentiation model when firms sell global products. If exante quality of foreign firms is lower (higher) than the quality of exporting firms, a mild minimum quality standard in the home market hinders (supports) exports. The minimum quality standard increases quality in both markets. A welfare maximizing minimum quality standard is always lower under trade than under autarky. A Minimum quality standard reduces profits for the exporting firm. It increases domestic welfare, but reduces welfare in the export market

Parallel Trade of Pharmaceuticals. Conflicts in Health Policy Objectives and Regulatory Externalities in the EU Internal Market

Health policy in the EU is characterized by two underlying conflicts: First, government interventions or pharmaceutical parallel trade, i.e. trade outside the manufacturer's authorized distribution channel, may induce a conflict between different health policy objectives such as expenditure reduction and distributive objectives. Second, health policy is in the competence of member states, but the EU internal market may generate externalities of national decisions. This thesis addresses these conflicts of pharmaceutical regulation within the EU. Initially, I compare a maximum price system (price cap regulation) and a reference price system (reimbursement limit) with respect to their performance in different health policy objectives. The reference price system reduces public pharmaceutical expenditure to a larger extent, but results in higher financial exposure of patients and lower access to pharmaceuticals. The subsequent chapters investigate the link between pharmaceutical parallel trade and pharmaceutical regulation. Chapter 4 illustrates that national decisions on health policy, in particular, changes in coinsurance rates, result in externalities under parallel trade. Parallel trade generates a price-decreasing competition effect in the destination country and a price-increasing double marginalization effect in the source country. An increase of the coinsurance rates in the destination country mitigates the double marginalization effect in the source country. An increase of the coinsurance rate in the source country reinforces the competition effect in the destination country. A subsequent chapter compares a coinsurance scheme (consumers pay a percentage of the drug price out-of-pocket) and an indemnity insurance scheme (reimbursement is independent of the drug price) with respect to the consequences of parallel trade on health care systems, especially on changes of co-payments and changes of public pharmaceutical expenditure. In the destination country, co-payments for patients decrease to a larger extent under indemnity insurance, reductions of public pharmaceutical expenditure occur only under coinsurance. In the source country, co-payments increase less under coinsurance, health expenditure is reduced more under indemnity insurance. The last chapter studies the effect of pharmaceutical regulation at the wholesale level, in particular, maximum wholesale margins (restriction of pricing by the intermediary) and mandatory rebates (restriction of the pricing by the manufacturer) on drug prices, quantities, and public pharmaceutical expenditure. Maximum wholesale margins enhance the manufacturer's ability to reduce competition from parallel trade in the destination country by increasing wholesale prices. In a symmetric equilibrium, maximum wholesale margins of both countries party offset each other, mandatory rebates reinforce each other

Persistence of a network core in the time evolution of interlocking directorates

We examine the bipartite graphs of German corporate boards in 1993, 1999 and 2005, and identify cores of directors who are highly central in the entire network while being densely connected among themselves. Germany's corporate governance has experienced significant changes during this time, and there is substantial turnover in the identity of core members, yet we observe the persistent presence of a network core, which is even robust to changes in the tail distribution of multiple board memberships. Anecdotal evidence suggests that core persistence originates from the board appointment decisions of largely capitalized corporations