The Single Market and Pharmaceutical Industry in the European Union: Is There Any Evidence of Price Convergence?

Posted: 28 Jun 2007

See all articles by Aysegul Timur

Aysegul Timur

Hodges University - Kenneth Oscar Johnson School of Business

Gabriel Picone

Department of Economics

Jeffrey S. DeSimone

University of Texas at Arlington - College of Business Administration - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

During the last two decades, the European Union (EU) has experienced closer market integration through the removal of trade barriers, the establishment of a single market, and the reduction of exchange rate volatility. In addition, there have been several structural reforms in product markets designed to increase competition, monitor cross-country price differences and increase transparency. One anticipated effect of market integration is price convergence, because of the reduced potential for price discrimination across the EU. This paper explores market integration and price convergence in the European pharmaceutical market, which is the fifth largest industry in the EU. Since 1985, many EU directives have been adopted to achieve a single EU-wide pharmaceutical market, with the aim of enhancing the quality of life for European citizens and the European pharmaceutical industry's competitiveness and research and development capability. Using annual 1994-2003 IMS Health data from five EU countries on prices of drugs at the molecule level used to treat cardiovascular disease, this paper explains how the integration process has affected cross-country drug price dispersion in the EU. The results show evidence of price convergence in the pharmaceutical market, with long term price differences arising from country fixed effects.

Keywords: Market integration, European pharmaceutical market, unit root

Suggested Citation

Timur, Aysegul and Picone, Gabriel and DeSimone, Jeffrey S., The Single Market and Pharmaceutical Industry in the European Union: Is There Any Evidence of Price Convergence?. iHEA 2007 6th World Congress: Explorations in Health Economics Paper. Available at SSRN: https://ssrn.com/abstract=992975

Aysegul Timur (Contact Author)

Hodges University - Kenneth Oscar Johnson School of Business ( email )

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Gabriel Picone

Department of Economics ( email )

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United States
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813-974-6510 (Fax)

HOME PAGE: http://www.coba.usf.edu/departments/economics/facu

Jeffrey S. DeSimone

University of Texas at Arlington - College of Business Administration - Department of Economics ( email )

Box 19479 UTA
Arlington, TX 76019
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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