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Keywords:

  • drug launch timing;
  • international reference pricing

Summary

This paper analyzes the timing decisions of pharmaceutical firms to launch a new drug in countries involved in international reference pricing. We show three important features of launch timing when all countries refer to the prices in all other countries and in all previous periods of time. First, there is no withdrawal of drugs in any country and in any period. Second, whenever the drug is sold in a country, it is also sold in all countries with larger willingness to pay. Third, there is no strict incentive to delay the launch of a drug in any country. We then show that the first and third results continue to hold when the countries only refer to the prices of a subset of all countries in a transitive way and in any period. We also show that the second result continues to hold when the reference is on the last period prices only. Last, we show that the seller's profits increase as the sets of reference countries decrease with respect to inclusion. Copyright © 2014 John Wiley & Sons, Ltd.