We thank two anonymous referees for their thoughtful comments, which have considerably improved the paper. Any remaining errors, of course, are our own.
Article first published online: 2 JUL 2014
© 2014 The Authors. Health Economics Published by John Wiley & Sons Ltd.
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Volume 24, Issue 8, pages 966–977, August 2015
How to Cite
2015), Price-cap Regulation, Uncertainty and the Price Evolution of New Pharmaceuticals. Health Econ., 24, 966–977. doi: 10.1002/hec.3075., and (
The authors acknowledge the generous support of the Canadian Institutes of Health Research for this work, through an Emerging Team Grant on “Developing Effective Policies for Managing Technologies for Rare Diseases” and the European Research Council under the European Union's Seventh Framework Programme (FP/2007-2013) / ERC Grant Agreement no. 339239.
- Issue published online: 2 JUL 2015
- Article first published online: 2 JUL 2014
- Manuscript Accepted: 20 MAY 2014
- Manuscript Revised: 25 APR 2014
- Manuscript Received: 27 MAY 2013
- price-cap regulation;
- price evolution;
- pricing strategies;
- new pharmaceuticals
This paper examines the effect of the regulations restricting price increases on the evolution of pharmaceutical prices. A novel theoretical model shows that this policy leads firms to price new drugs with uncertain demand above the expected value initially. Price decreases after drug launch are more likely, the higher the uncertainty. We empirically test the model's predictions using data from the Canadian pharmaceutical market. The level of uncertainty is shown to play a crucial role in drug pricing strategies. © 2014 The Authors. Health Economics Published by John Wiley & Sons Ltd.