The effects of innovation and competition on drug prices
DOI:
https://doi.org/10.18381/eq.v23i1.7382Keywords:
Medicine prices; competition; innovation; price regulationAbstract
Objective: To analyze how innovation and competition affect the prices of specific medicine classes (cardiovascular, antibiotics, anti-inflammatory, and antidiabetes) across different Mexican cities, aiming to provide evidence for public policy design. Methodology: We employed a panel data regression analysis combined with a Principal Component Analysis (PCA) to identify the key variables driving price variation. Findings: Lagged innovation (measured by Google patent searches) and a higher number of firms are found to increase prices, while market concentration also drives them up. PCA identified the number of firms, population, and innovation as key contributing factors. Limitations: The study is restricted to urban cities in Mexico and four specific medicine classes, thus limiting the generalizability of the results. Originality: It provides recent empirical evidence on the nexus between competition, innovation, and prices, a topic scarcely explored within the Mexican context. Conclusions: Innovation and competition significantly impact medicine prices. Further studies are recommended to guide regulatory and promotional policies, including the measurement of deadweight loss generated by market imperfections.Downloads
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