We would like to acknowledge financial support from the British Academy, Grant number SG-50473 and the University of Kent Small Faculty Grants. We would also like to thank Mathan Satchi, Jagjit Chadha, and two anonymous referees for their helpful comments. The usual disclaimer applies.
UNIVERSAL ACCESS, PARALLEL TRADE AND INCENTIVES TO INNOVATE
Article first published online: 17 SEP 2013
© 2013 Board of Trustees of the Bulletin of Economic Research and John Wiley & Sons Ltd
Bulletin of Economic Research
Volume 66, Issue S1, pages S74–S91, December 2014
How to Cite
Acharyya, R. and García-Alonso, M. D. C. (2014), UNIVERSAL ACCESS, PARALLEL TRADE AND INCENTIVES TO INNOVATE. Bulletin of Economic Research, 66: S74–S91. doi: 10.1111/boer.12013
- Issue published online: 20 JAN 2015
- Article first published online: 17 SEP 2013
- British Academy. Grant Number: SG-50473
- University of Kent Small Faculty
- health systems;
- income based subsidies;
- price discrimination;
Governments often subsidize poorer groups in society to ensure their access to new drugs. We analyse the optimal income-based price subsidies in a strategic environment. We show that universal access is less likely to arise when price arbitrage prevents international price discrimination. When this is not the case, under some income ranges, bilateral universal coverage can be supported by equilibrium subsidies together with bilateral partial provision. In such a case, international health policy coordination becomes relevant. We also show that asymmetric universal access to medicines across countries can arise, even when countries are ex ante symmetric, when international price discrimination is possible and governments cannot design subsidies proportional to either income or quality.