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Direct and indirect savings from parallel imports in Sweden
1Department of Economics, Umeå University, Umeå, Sweden. david.granlund@umu.se.
Health Economics Review
|August 31, 2022
Summary
Parallel imports in Sweden significantly reduced pharmaceutical costs through direct and indirect savings when discounts were forbidden. Allowing discounts shifted savings from lower list prices to pharmacies via secret discounts.
Area of Science:
- Health Economics
- Pharmaceutical Policy
Background:
- Assessing the economic impact of parallel pharmaceutical imports in Sweden.
- Examining the influence of discount policies on parallel import savings.
Purpose of the Study:
- Quantify direct and indirect savings from parallel imports in Sweden.
- Analyze the effect of allowing discounts on parallel import price competition.
Main Methods:
- Analysis of monthly prices for 3068 products (discounts forbidden) and 2504 products (discounts allowed).
- Utilized dynamic models with lagged competitor numbers as instrumental variables for price effect estimation.
Main Results:
- Parallel imports achieved 16% market share, 9% lower prices, yielding 231M SEK direct savings annually.
- Indirect savings of 421M SEK/year from a 6% long-term price reduction.
- Total pharmaceutical cost reduction of 4% for on-patent drugs.
Conclusions:
- When discounts were forbidden, parallel imports generated substantial savings through lower list prices.
- Allowing discounts shifted savings to pharmacies via secret discounts, reducing list price competition.
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