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Microeconomics Case Study

Case Title:

European Drug Pricing and its Implications

Publication Year : 2004

Authors: Sardhi Kumar Gonela & Sumit Kumar Chaudhuri

Industry: Health Care


Case Code: MBM0004

Teaching Note: Not Available

Structured Assignment: Not Available

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Due to lower drug prices in the European Union (EU), by the turn of the 21st century the per capita spending on drugs in Europe had been much less when compared to that in the US. Lower drug prices in Europe had resulted in cumulative savings of $1 trillion since 1992. Although such huge savings were apparently lucrative, it was opined that Europe would be losing out to the US in the long run as higher drug prices in the US made it a more lucrative market for the drug makers. It was also opined that due to a higher probability of realising the money invested in the research and development of new drugs in the US, more and more drug manufacturers would shift their research centres to the US resulting in research and development job losses in Europe.

Pedagogical Objectives:

  • To discuss the underlying causes for price distortions between the EU and US
  • To discuss how the European drug pricing regulations can be detrimental to the long-term health of the European drug industry .

Keywords : European Union,Government and Business Environment Case Study, Lipitor, Drug price regulations in Europe, Health care systems in Europe, National Health Services in Europe, Reference pricing, Profit regulation, Product price controls,Business Environment Case Study, New molecular entities (NMEs), Research and development (R&,D) investments in European drug industry, Pfizer Inc, Tamoxifen, Novartis, Monopsonist price setter, Drug price distortions

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