Working Paper No. 546

Parallel Imports of Pharmaceutical Products in the European Union

Published: January 18, 2001Pages: 28Keywords: Parallel Imports; International Arbitrage; Drug Pricing JEL-codes: F12; I11; L12

Parallel Imports of Pharmaceutical Products in the European Union Mattias Ganslandt and Keith E. Maskus


imports is unlimited, the manufacturer chooses deterrence and international prices converge. Second, with endogenously limited arbitrage the manufacturing firm accommodates and the price in the home market falls as the volume of parallel trade rises. Simple empirical tests favor the accommodation hypothesis with a time lag. Using data from Sweden we find that the prices of drugs subject to competition from parallel imports increased less than other drugs during the period 1995-1998. Approximately 3/4 of this effect on be attributed to lower prices of parallel imports and 1/4 to lower prices charged by the manufacturing firm. Econometric analysis find that rents to parallel importers (or resource costs in parallel trade) could be more than the gain to consumers from lower prices.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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