| dc.description.abstract | In this paper we study the impact of reference pricing (RP) on entry of generic firms in
the pharmaceutical market. For given prices, RP increases generic firms' expected profit,
but since RP also stimulates price competition, the impact on generic entry is theoretically
ambiguous. In order to empirically test the effects of RP, we exploit a policy reform in
Norway in 2005 that exposed a subset of drugs to RP. Having detailed product-level data for
a wide set of substances from 2003 to 2013, we find that RP increased the number of generic
drugs. We also find that RP increased market shares of generic drugs, reduced the prices
of both branded and generic drugs, and led to a (weakly significant) decrease in total drug
expenditures. The reduction in total expenditures was relatively smaller than the reduction
in average prices, re
ecting the fact that lower prices stimulated total demand. | nb_NO |
