Posted by Michael Wonder on 23 Nov 2018
Differential pricing of pharmaceuticals: theory, evidence and emerging issues
24 November 2018 - Differential pricing—manufacturers varying prices for on-patent pharmaceuticals across markets—can, in theory, lead to increased patient access and improved research and development incentives compared with charging a uniform price across markets.
Theoretical models of price discrimination and Ramsey pricing support differentials based inversely on price elasticities, which are plausibly related to average per capita income. However, these models do not address absolute price levels and dynamic efficiency.
Value-based differential pricing theory incorporates insurance coverage and addresses static and dynamic efficiency. Limited empirical evidence indicates a weak positive relationship between prices and gross domestic product per capita.
