Squeezing the Last Drop Out of Your Suppliers: An Empirical Study of Market‐Based Purchasing Policies for Generic Pharmaceuticals

28 Pages Posted: 5 Nov 2017

See all articles by Mats Bergman

Mats Bergman

Södertörn University, Stockholm

David Granlund

University of Umea

Niklas Rudholm

HUI Research

Date Written: December 2017

Abstract

We study the effect of the degree of exclusivity for the lowest bidder on the average price of generic pharmaceuticals in the short and long terms. Our results indicate that a 1‐percentage‐point gain in market share of the lowest bidder reduces average costs by 0.2% in the short term and 0.8% in the long term, but also reduces the number of firms by 1%. We find that reducing the number of firms has a strong positive (and hence counteracting) effect on average prices, a 1% reduction raising prices by approximately 1%.

Suggested Citation

Bergman, Mats A. and Granlund, David and Rudholm, Niklas, Squeezing the Last Drop Out of Your Suppliers: An Empirical Study of Market‐Based Purchasing Policies for Generic Pharmaceuticals (December 2017). Oxford Bulletin of Economics and Statistics, Vol. 79, Issue 6, pp. 969-996, 2017, Available at SSRN: https://ssrn.com/abstract=3064384 or http://dx.doi.org/10.1111/obes.12180

Mats A. Bergman (Contact Author)

Södertörn University, Stockholm ( email )

Alfred Nobels allé 7, Flemingsberg
Stockholm, Stockholm 14189
Sweden

David Granlund

University of Umea ( email )

Samhallsvetarhuset, Plan 2
Umea University
Umeå, SE 901 87
Sweden

Niklas Rudholm

HUI Research

Regerinsgatan 60
Stockholm, SE-10329
Sweden

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