دانلود رایگان ترجمه مقاله اثرات قانون سقف قیمت روی زنجیره تامین دارو (نشریه الزویر 2019)

اثرات قانون سقف قیمت روی زنجیره تامین دارو

Effects of price cap regulation on the pharmaceutical supply chain

Abstract

This paper considers a pharmaceutical supply chain composed of one pharmaceutical manufacturer and one pharmacy. We investigate how price cap regulation affects pharmaceutical firms’ pricing decisions. We also evaluate the economic and social performance of the pharmaceutical supply chain and assess the risks associated with price cap regulation. The derived equilibriums under different price cap regulations, including retailer price cap regulation, manufacturer price cap regulation and linkage price cap regulation, are compared to that without regulation. Our results show that one-sided price cap regulation will damage the economic performance of the regulated firm, whereas the unregulated firm may gain a financial advantage. The regulation may increase the risk of a supply shortage if pharmaceutical firms cannot cope with the financial loss. In contrast, linkage price cap regulation can be an effective policy for improving both the economic and social performance of the pharmaceutical supply chain.

1 Introduction

The pharmaceutical industry plays an important role in the economy, society, and public health in almost every country in the world. The pricing of pharmaceutical products is a vital and contentious issue for both developed and developing countries (Danzon, Mulcahy, & Towse, 2015; Danzon, Towse, & Mestre-Ferrandiz, 2015). For middleand low-income countries, effective pricing of pharmaceuticals is critical to the accessibility and affordability of medicines and the population’s social welfare. For example, despite the rapid economic development in China, the high price of drugs has continuously been blamed for unaffordable healthcare service for less-advantaged people, which has triggered increasing complaints from the public (Yu, Li, Shi, & Yu, 2010). For developed countries, although the affordability of drugs may not be a challenge to their citizens due to extensive medical insurance, high drug prices have certainly increased the burden of government public expenditures.

In the context of a significant increase in pharmaceutical expenditures during the two last decades, there has been growing interest from governments in controlling the price of pharmaceutical products (Bardey, Bommier, & Jullien, 2010; Troyer & Krasnikov, 2011). Many governments frequently consider regulatory mechanisms, e.g., price cap regulation and reference pricing, to prevent pharmaceutical firms from charging high drug prices and protect their citizens from paying too much. Whereas price caps are often used to limit pharmaceutical firms’ ability to exploit their market power by charging high prices, reference pricing aims at stimulating market competition by introducing more price elastic demand (Brekke, Königbauer, & Straume, 2007; Brekke, Grasdal, & Holmås, 2009). For instance, most Europe Union nations set caps on the consumer price of generic drugs and/or regulate the maximum reimbursement rate, whereas an intervention through price regulation seems to be less necessary in the drug market according to economic theory (Puig-Junoy, 2010). In China, pricing and reimbursement are important aspects of pharmaceutical policy that have been included in the central government’s large-scale healthcare reform launched in April 2009 (Chen, 2009; Hu & Mossialos, 2016).

The Chinese government has set price caps on different pharmaceutical products in response to soaring drug prices (Hu & Mossialos, 2016). Unfortunately, evidence emerging from recent research (Han, Liang, Su, Xue, & Shi, 2013; Wu, Zhang, & Qiao, 2015; Yang et al., 2016) indicates that the price cap policies were ineffective and resulted in some unintended consequences. The media reported that there were shortages of thousands of drugs in pharmacies in Guangdong Province of China. This was echoed by Zhang et al. (2016), who claimed that the reduction of the price cap level is associated with a higher incidence of pharmaceutical firms’ exit from markets. The introduction of new industry regulations could have a profound impact on firms’ performance (Pugliese, Minichilli, & Zattoni, 2014) and contribute to business failure (Amankwah-Amoah, 2016). Regulators have to be conscious of the unintended consequence of a continuous reduction of the price cap level. A thoughtful design of drug pricing regulation and risk evaluation of price cap policies are essential to minimizing the risk of policy failure. .

The existing literature mainly examines pricing regulations from the perspective of macro health economics (Danzon, Mulcahy, et al., 2015; Danzon, Towse, et al., 2015; Håkonsen, Horn, & Toverud, 2009; Hu & Mossialos, 2016), whereas little attention has been paid to the evaluation of pharmaceutical pricing regulations considering how pharmaceutical firms and supply chains will behave under the regulations and how their behavior impacts the social and economic performance of the sector. By contrast, previous studies in the operation and supply chain literature on pharmaceutical products often focus on optimizing operations/supply chain decisions under different regulatory policies (Yu et al., 2010). Companies often respond to regulatory policies strategically and operationally to maximize their benefits. Therefore, when policy makers consider the development of new regulations, it is valuable for regulators to understand how firms will react to new regulations and the consequential economic and social performance. To address this gap in the literature, some key questions are discussed considering price cap regulation for the pharmaceutical supply chain.

(1) What are the optimal pricing decisions of the pharmaceutical manufacturer and pharmacy under price cap regulation?

(2) How can the government develop appropriate price cap regulation to improve social welfare and economic sustainability and mitigate the risk of policy failure? (3) What are the key parameters of price cap regulation to achieve the coordination of the pharmaceutical supply chain?

To address the above questions, this research mainly focuses on price cap regulation and examines how the regulations affect the pharmaceutical firms’ operational decisions and the consequential economic and social performance. This paper investigates a twoechelon pharmaceutical supply chain composed of one pharmaceutical manufacturer and one pharmacy. The pharmaceutical manufacturer is the Stackelberg leader, and the pharmacy is the follower. We not only consider retailer price cap regulation and manufacturer price cap regulation, which are often adopted by governments, but also propose a linkage price cap regulation where the whole pharmaceutical supply chain is regulated. Through a comparison of optimal prices, profits and social welfare between the scenarios with and without regulations, we analyze the effect of each regulatory policy. In this way, we aim to solve the problem of selecting an optimal regulation and examine the supply chain coordination.

The rest of the paper is organized as follows. Section 2 reviews relevant research streams. The models and equilibrium analysis are provided in Section 3. Based on the model formulation and assumptions, we use the model with no price cap regulation as a base model and then propose a retailer price cap regulation model, manufacturer price cap regulation model, and linkage price cap regulation model. In Section 4, the effects of alternative price cap regulations on the equilibriums and profits of the pharmacy and pharmaceutical manufacturer are discussed. In Section 5, we further discuss pharmaceutical supply chain coordination under the optimally designed p

rice cap regulation. Finally, the main conclusions and future extensions are highlighted in Section 6.