International Trade and Determinants of Price Differentials of Insulin Medicine

25 Pages Posted: 15 Dec 2015

See all articles by Matthias Helble

Matthias Helble

Asian Development Bank; ADBI; ADBI

Toshiaki Aizawa

Asian Development Bank Institute

Date Written: December 15, 2015

Abstract

Empirical studies on pharmaceuticals pricing across countries have found evidence that prices vary according to per capita income. These studies are typically based on survey data from a subset of countries and cover only one year. In this paper, we study the international trade and price of insulin by using detailed trade data for 186 importing countries from 1995 to 2013. With almost 12,000 observations, our study constitutes the largest comparative study on pharmaceutical pricing conducted so far. The large dataset allows us to uncover new determinants of price differentials. Our analysis shows that the international trade of insulin increased substantially over this time period, clearly outpacing the increasing prevalence of diabetes. Using the unit values of imports, we also study the determinants of price differentials between countries. Running various panel regressions, we find that the differences in prices across countries can be explained by the following factors: First, corroborating earlier studies, we find that per capita GDP is positively correlated with the unit price of insulin. Second, the price of insulin drugs originating from Organisation for Economic Co-operation and Development countries tends to be substantially higher than for those imported from developing countries. Third, more intense competition among suppliers leads to lower insulin prices. Fourth, higher out-of-pocket payments for health care are associated with higher prices. Finally, higher volumes and tariffs seem to result in lower unit prices.

Keywords: Insulin trade, price differentials, pharmaceuticals trade

JEL Classification: F14, I11

Suggested Citation

Helble, Matthias and Aizawa, Toshiaki, International Trade and Determinants of Price Differentials of Insulin Medicine (December 15, 2015). ADBI Working Paper 551, Available at SSRN: https://ssrn.com/abstract=2703675 or http://dx.doi.org/10.2139/ssrn.2703675

Matthias Helble (Contact Author)

Asian Development Bank ( email )

Philippines
006326831120 (Phone)

ADBI ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

ADBI ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

Toshiaki Aizawa

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

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