TY - UNPB

T1 - Drug Prices, Rents, and Votes in the German Health Care Market

T2 - An Application of the Peltzman Model

AU - Busch, Anne Maria

PY - 2015/5

Y1 - 2015/5

N2 - Using the health care reform of 2004 as an experience, the reaction of consumers (insured persons) and producers (pharmaceutical industry) based on electoral behavior and relating to drug prices and co-payments imposed on drugs is analyzed. The changes in prices and medications after this reform make it to a natural choice. For the analysis, the interest group model by Peltzman (1976) is applied tothe German health care market. The vote-maximizing government has to find the optimal combination of rent and price of regulation. As a result, the vote-maximizing outcome is determined by a price level which reflects the interests of consumers as well as the pharmaceutical industry. The analysis of the reaction of consumers related to the co-payment rules of 2004 leads to the hypothesis that the regulator, and finally the pharmaceutical industry, sets drug prices in a way that they are ranging from5 to 50 Euro. Prices between 50 and 100 Euro are possible as well, reflecting a balance of power facing the pharmaceutical industry. Producers who had accepted the 1989 reference price had an incentive to increase their price while lowering their sales volume.

AB - Using the health care reform of 2004 as an experience, the reaction of consumers (insured persons) and producers (pharmaceutical industry) based on electoral behavior and relating to drug prices and co-payments imposed on drugs is analyzed. The changes in prices and medications after this reform make it to a natural choice. For the analysis, the interest group model by Peltzman (1976) is applied tothe German health care market. The vote-maximizing government has to find the optimal combination of rent and price of regulation. As a result, the vote-maximizing outcome is determined by a price level which reflects the interests of consumers as well as the pharmaceutical industry. The analysis of the reaction of consumers related to the co-payment rules of 2004 leads to the hypothesis that the regulator, and finally the pharmaceutical industry, sets drug prices in a way that they are ranging from5 to 50 Euro. Prices between 50 and 100 Euro are possible as well, reflecting a balance of power facing the pharmaceutical industry. Producers who had accepted the 1989 reference price had an incentive to increase their price while lowering their sales volume.

KW - Economics

KW - German health care market

KW - interest groups

KW - political pressure

KW - obbyism

M3 - Working papers

T3 - Working Paper Series in Economics

BT - Drug Prices, Rents, and Votes in the German Health Care Market

PB - Institut für Volkswirtschaftslehre der Universität Lüneburg

CY - Lüneburg

ER -