Thanassis Kazanas and Evangelos Elmaidis

Correspondence: Thanassis Kazanas, tkazanas@econ.auth.gr

Aristotle University of Thessaloniki, Greece.

pdf (464.54 Kb) | doi: https://doi.org/10.47260/bae/1325

Abstract

This study investigates the relationship between pharmaceutical pricing policies, generic drug penetration, and consumer purchasing power on price evolution, as measured by the Harmonized Index of Consumer Prices (HICP). Focusing on eleven European countries from 2013 to 2023, the empirical analysis employs a balanced panel data sample. The natural logarithm of the HICP for pharmaceuticals serves as the dependent variable, while independent variables include generic market share (%), binary representations of pricing policies, and the logarithm of per capita GDP in Purchasing Power Standard (PPS). Using Pooled OLS, Fixed/Random Effects, and Mundlak (Correlated Random Effects) models, the results reveal significant correlations. Specifically, Internal Reference Pricing (IRP) and Value-Based Pricing (VBP) show a strong negative correlation with drug prices, highlighting their effectiveness in cost containment. Conversely, External Reference Pricing (ERP) demonstrates a positive correlation, suggesting price convergence toward higher levels within the selected sample. Consumer purchasing power exhibits a dual impact; while within-country GDP growth correlates with higher prices, wealthier countries often maintain lower overall price levels through robust negotiation mechanisms. Notably, generic penetration alone did not significantly influence nominal price levels in this sample. Overall, the findings underscore the complexity of pharmaceutical price dynamics, which are shaped by a multifaceted interplay of regulatory mechanisms and macroeconomic conditions.

Keywords:

  Pricing policies, Generic drug penetration, Purchasing power, Drug prices, Fixed Effects, Random Effects, Mundlak.

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