Pharmaceutical Price Controls and Entry Strategies

Abstract

This paper finds that the use of price controls has a statistically and quantitatively important effect on the extent and timing of the launch of new drugs. Firms headquartered in countries that regulate price reach fewer markets than those in countries without price controls. Companies avoid price-controlled markets, and are less likely to introduce products in additional markets after entering a price-controlled country. Launches into low-price European countries are further delayed following legalization of parallel imports. The results suggest that price regulation in one country affects entry into other countries, and may affect the strategies of domestic firms. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.