Cross-national price differences for pharmaceuticals: how large, and why?

Bilateral drug price and quantity indexes, based on comprehensive data for seven countries (US, Canada, France, Germany, Italy, Japan and the UK), ref ute the conventional wisdom that US drag prices are much higher than elsewh ere, for Laspeyres (US-weighted) indexes. Previous drug-price comparisons a re biased by unrepresentative samples and unweighted indexes. Quasi-hedonic regression shows that cross-national price differences reflect differences in product characteristics and in their implicit prices, which reflect the regulatory regime; Strict price regulation systematically lowers prices fo r older molecules and globally diffused molecules. Generic competition lowe rs prices in less-regulated regimes, which also have more price-elastic dem and. (C) 2000 Elsevier Science B.V. All rights reserved.