Coordinating on lower prices: pharmaceutical pricing under political pressure

We investigate the effects of political activity on pharmaceutical prices, focusing on the health care reform period in the early 1990s. We characterize firms based on their vulnerability to future price regulation and find that the more vulnerable firms were more likely to take various actions to f...

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Bibliographic Details
Published in:The Rand journal of economics 2006-06, Vol.37 (2), p.324-340
Main Authors: Ellison, Sara Fisher, Wolfram, Catherine
Format: Article
Language:English
Subjects:
Antibiotics
Business structures
Business studies
Costs and Cost Analysis - economics
Costs and Cost Analysis - trends
Data analysis
Datasets
Drug Costs - trends
Drug Industry - economics
Drugs
Economic models
Economics, Pharmaceutical - trends
Evaluation
Forecasting
Government Regulation
Health administration
Health care policy
Health care reform
Health Care Reform - economics
Health technology assessment
Humans
Industrial regulation
Influence
Laws, regulations and rules
Lobbying
Models, Economic
Pharmaceutical industry
Pharmaceutical preparations
Pharmaceuticals
Political aspects
Politics
Prescription drugs
Price changes
Price increases
Price policy
Price regulation
Prices and rates
Pricing
Pricing policies
Rate regulation
Regulation
Studies
United States
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Summary:We investigate the effects of political activity on pharmaceutical prices, focusing on the health care reform period in the early 1990s. We characterize firms based on their vulnerability to future price regulation and find that the more vulnerable firms were more likely to take various actions to forestall regulation, most notably coordinating on a specific percentage price increase during 1993. Since moderating price increases could have averted regulation, the coordination appears to be the industry's response to a collective action problem.
ISSN:0741-6261
1756-2171
DOI:10.1111/j.1756-2171.2006.tb00018.x