Price regulation of drugs: Lessons from Germany

• DOI: 10.1007/bf00157672
• Publication Date: 2004-11-02T09:52:39Z
• Authors: Peter Zweifel; Luca Crivelli
• Keywords: 03 medical and health sciences; 0302 clinical medicine

This paper purports to explain the pricing policy of pharmaceutical companies in Germany prior and after the introduction of reference prices (RP) in 1989. First, the threat of such regulation may have kept prices finite despite a completely insured market. Next, the pricing policies of both the producer of an innovative drug and of a competing generic under RP are predicted. These predictions are then confronted with actual pricing policy for three products in the guise of case studies. Finally, the impact of modified copayment rules on pricing decisions is analyzed.