Price regulation and generic competition in the pharmaceutical market


Dalen, Dag Morten, Steinar Strøm og Tonje Haabeth




European Journal of Health Economics

Vol 7, No3, 208-214


In March 2003 the Norwegian government implemented yardstick based price regulation schemes on a selection of drugs experiencing generic competition. The retail price cap, termed “index price”, on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998-2004 for the 6 drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.


C35, D43, I18, L11


Discrete choice, demand for pharmaceuticals, monopolistic competition, evaluation of yardstick based price regulation


Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.:
Frisch prosjekt: 4111 - Government financing of drug consumption in Norway and the markets for pharmaceuticals


Norges forskningsråd