eThesis - School of Business electronic theses

OBJECTIVES Pharmaceutical price regulation has been widely implemented to most of the developed countries during the last 20 years. Price regulation has evoked strong debates because it is not clear whether it is necessary or not and, if necessary which tools to use and how should it be designed. In this thesis, I will conduct a literature review and analysis on how price regulation affects market prices and competition in the pharmaceutical industry.

THEORETICAL FRAMEWORK The model of Brekke, Grasdal and Halmås in "Reference Pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment", published in the Journal of Public Economics in 2011 serves as the theoretical framework for this thesis. Brekke et al. discuss the competition between the branded and the generic pharmaceutical drugs in light of three regulatory settings: the price cap regulation, the exogenous reference price regulation and the endogenous reference price regulation.

KEY FINDINGS Based on the literature review, price regulation has led to an average decrease of pharmaceutical prices and induced savings on pharmaceutical expenditures. Furthermore, price regulation seems to affect competitive strategies of pharmaceutical firms affecting launch, entry and R&D strategies.