External referencing and pharmaceutical price negotiation

External referencing (ER) imposes a price cap for pharmaceuticals based on prices of identical products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm while a home country (H) can either negotiate independently or implement ER based on the foreign price. We show that country H always prefers ER if (i) it can condition ER on the drug being subsidized in the foreign country and (ii) copayments are higher in H than in F. H's preference isreinforced when the difference between country copayments is large and/or H's population is small. External referencing by H always harms F if (ii) holds, but less so if (i) holds.pharmaceuticals ; external referencing ; price negotiation

External referencing and pharmaceutical price negociation.

External referencing (ER) imposes a price cap for pharmaceuticals, based on prices of identical or comparable products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm, whereas a home country (H) can either negotiate prices independently or implement ER, based on the foreign price. We show that country H prefers ER if copayments in H are relatively high. This preference is reinforced when H's population is small. Irrespective of relative country sizes, ER by country H harms country F. Our model is inspired by the wide European experience with this cost-containment policy. Namely, in Europe, drug authorization and price negotiations are carried out by separate agencies. We confirm our main results in two extensions. The first one allows for therapeutic competition between drugs. In the second one, drug authorization and price negotiation take place in a single agency.pharmaceuticals; external referencing; price negotiation;

How complex are the contracts offered by health plans?

Financial support by a Marie Curie Fellowship under contract no. HPMF-CT-01206. Olivella acknowledges financial support from projects SEJ2006-00538, ECO2009-7616, Consolider-Ingenio CSD2006-16, 2009SGR-169, and Barcelona Economics-Xarxa CREA. Olivella is a Research Fellow of MOVE (Markets, Organizations and Votes in Economics)When health plans compete under adverse selection, the competitive equilibrium set of contracts is unique. However, the allocation of these contracts among health plans is undetermined. We show that three health plans suffice to sustain an equilibrium where each health plan offers a single contract and attracts a single type of agent (full specialization). We also show that this equilibrium can be ruled out by introducing any horizontal differentiation, and that if in equilibrium each health plan attracts all types of agents, at least one of the health plans must do so through a menu of contracts

Per què adquirir una assegurança de salut privada?

Per què algunes persones compren assegurances de salut privades quan ja existeix un sistema nacional de salut públic i gratuït? Aquest article desenvolupa un model teòric i contrasta empíricament la seva predicció principal emprant dades del Regne Unit. El model prediu que si les persones tenen millor informació que les asseguradores sobre el seu propi estat de salut o sobre les seves preferències per a la salut, les persones més propenses a utilitzar els serveis sanitaris compraran una assegurança privada, mentre que la resta optarà per usar els serveis del sistema nacional de salut. Sorprenentment, el que determina aquestes decisions són les preferències per la salut.Por qué algunas personas compran seguros de salud privados cuando ya existe un sistema nacional de salud público y gratuito? Este artículo desarrolla un modelo teórico y contrasta su predicción principal con datos del Reino Unido. El modelo predice que si las personas tienen mejor información que las aseguradoras sobre su propio estado de salud o sobre sus preferencias, entonces las más propensas a utilizar los servicios sanitarios comprarán un seguro privado, mientras que el resto optará por usar los servicios del sistema nacional de salud. Sorprendentemente, lo que determina estas decisiones son las preferencias por la salud.Why do some people buy private health insurance when there is a national system of free health services? This article develops a theoretical model and tests its main prediction with data from the UK. The model predicts that if people have better information than insurers about their own health or preferences then those more likely to use health services will buy private insurance, while the rest will use the services of the national health system. Surprisingly, it is the preference for health what drives these decisions

Reputational Concerns with Altruistic Providers

We study a model of reputational concerns when doctors differ in their degree of altruism and they can signal their altruism by their (observable) quality. When reputational concerns are high, following the introduction or enhancement of public reporting, the less altruistic (bad) doctor mimics the more altruistic (good) doctor. Otherwise, either a separating or a semi-separating equilibrium arises: the bad doctor mimics the good doctor with probability less than one. Pay-for-performance incentive schemes are unlikely to induce crowding out, unless some dimensions of quality are unobservable. Under the pooling equilibrium a purchaser can implement the first-best quality by appropriately choosing a simple payment scheme with a fixed price per unit of quality provided. This is not the case under the separating equilibrium. Therefore, policies that enhance public reporting complement pay-for-performance schemes

Hospitals : Teaming Up

This article describes the economics literature on the operation of hospitals using a framework based on the notion of "teams". It presents two distinctive features. The first one is the separation of ownership and control in hospitals and the other is to look at hospitals through the lens of teams. It addresses technology issues like output measurement, as well as economies of scale and scope and gives a brief overview of different theories on how the ruling body of the hospital chooses between the different technologically feasible options. It shows that the idea of team interactions can be extended beyond the limits of the hospital in two main areas. It addresses the relationship of hospitals with third-party payers as well as notices that patients arrive at hospital referred there by other agents, namely general practitioners. It further discusses and proposes challenges for future research

Centralized flexibility services for distribution system operators through distributed flexible resources

Under the context of smart grids within smart cities, increasing distributed generation, consumer empowerment and emerging flexibility services, distribution system operators could benefit by activating flexibility in distribution grids to avoid deploying new infrastructures and grid overloading. The solution offered by this work is an energy management system algorithm capable of activating flexibility behind the prosumer main meter during constrained periods. Therefore, the distribution system operator could compensate grid congestion during high consumption or production periods and increase their renewable generation hosting capacity by using behind-the-meter flexibility during peak production periods.Postprint (published version

Local flexibility market design for aggregators providing multiple flexibility services at distribution network level

This paper presents a general description of local flexibility markets as a market-based management mechanism for aggregators. The high penetration of distributed energy resources introduces new flexibility services like prosumer or community self-balancing, congestion management and time-of-use optimization. This work is focused on the flexibility framework to enable multiple participants to compete for selling or buying flexibility. In this framework, the aggregator acts as a local market operator and supervises flexibility transactions of the local energy community. Local market participation is voluntary. Potential flexibility stakeholders are the distribution system operator, the balance responsible party and end-users themselves. Flexibility is sold by means of loads, generators, storage units and electric vehicles. Finally, this paper presents needed interactions between all local market stakeholders, the corresponding inputs and outputs of local market operation algorithms from participants and a case study to highlight the application of the local flexibility market in three scenarios. The local market framework could postpone grid upgrades, reduce energy costs and increase distribution grids’ hosting capacity.Postprint (published version

Bundling in telecommunications

The paper offers an overview of the literature on bundling in telecommunications sector and its application in the Spanish marke