Pricing Behaviour of Pharmacies after Market Deregulation for OTC Drugs: The Case of Germany

Health Policy, Vol. 84, No. 1, pp. 30-38, September 2007

Posted: 26 Mar 2010 Last revised: 20 Aug 2010

See all articles by Tom Stargardt

Tom Stargardt

University of Hamburg

Jonas Schreyoegg

University of Hamburg - Faculty of Economics and Business Administration

Reinhard Busse

Technische Universität Berlin (TU Berlin)

Date Written: November 1, 2007

Abstract

OBJECTIVE: To examine the price reactions of German pharmacies to changes made to OTC drug regulations in 2004. Prior to these changes, regulations guaranteed identical prices in all German pharmacies.

METHODS: Two years after market deregulation, 256 pharmacies were surveyed to determine the retail prices of five selected OTC drugs. A probit regression model was used to identify factors that increased the likelihood of price changes. In addition, 409 pharmacy consumers were interviewed to gather information on their knowledge of the regulatory changes and to better explain consumer behaviour.

RESULTS: Data was collected on a total of 1215 prices. Two years after deregulation, 23.1% of the participating pharmacies had modified the price of at least one of the five OTCs included in our study. However, in total, only 7.5% of the prices differed from their pre-deregulation level. The probit model showed that population density and the geographic concentration of pharmacies were significantly associated with price changes. Interestingly, the association with the geographic concentration of pharmacies was negative. The consumer survey revealed that 47.1% of those interviewed were aware of the deregulation.

CONCLUSIONS: Our findings indicate that, two years after deregulation, very few pharmacies had made use of individual pricing strategies; price competition between pharmacies in Germany is thus taking place only a very small scale.

Suggested Citation

Stargardt, Tom and Schreyoegg, Jonas and Busse, Reinhard, Pricing Behaviour of Pharmacies after Market Deregulation for OTC Drugs: The Case of Germany (November 1, 2007). Health Policy, Vol. 84, No. 1, pp. 30-38, September 2007. Available at SSRN: https://ssrn.com/abstract=1574157

Tom Stargardt

University of Hamburg ( email )

Hamburg Center for Health Economics
Esplanade 36
Hamburg, 20354
Germany

Jonas Schreyoegg (Contact Author)

University of Hamburg - Faculty of Economics and Business Administration ( email )

Von-Melle-Park 5
Hamburg, 20146
Germany

Reinhard Busse

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

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