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Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry

  • Izabela Jelovac
  • Catalina Bordoy
Article

Abstract

In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients’ level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare.

parallel imports welfare 

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Copyright information

© Springer Science+Business Media, Inc. 2005

Authors and Affiliations

  1. 1.CREPP—University of LiegeBelgium
  2. 2.MERITMaastricht UniversityThe Netherlands
  3. 3.CREPP—University of LiegeLiegeBelgium

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