Universal Access, Parallel Trade and Incentives to Innovate

Bulletin of Economic Research Vol. 66, Issue S1, pp. S74-S91, 2014

Posted: 1 Jun 2020

See all articles by Rajat Acharyya

Rajat Acharyya

Department of Economics, Jadavpur University

María D. C. García‐Alonso

University of Kent, Canterbury

Date Written: 2014

Abstract

Governments often subsidize poorer groups in society to ensure their access to new drugs. We analyse the optimal income‐based price subsidies in a strategic environment. We show that universal access is less likely to arise when price arbitrage prevents international price discrimination. When this is not the case, under some income ranges, bilateral universal coverage can be supported by equilibrium subsidies together with bilateral partial provision. In such a case, international health policy coordination becomes relevant. We also show that asymmetric universal access to medicines across countries can arise, even when countries are ex ante symmetric, when international price discrimination is possible and governments cannot design subsidies proportional to either income or quality.

Keywords: health systems, income based subsidies, innovation, pharmaceuticals, price discrimination

JEL Classification: D4, I1, L1

Suggested Citation

Acharyya, Rajat and Garcia-Alonso, Maria Carmen, Universal Access, Parallel Trade and Incentives to Innovate (2014). Bulletin of Economic Research Vol. 66, Issue S1, pp. S74-S91, 2014, Available at SSRN: https://ssrn.com/abstract=3591434

Rajat Acharyya (Contact Author)

Department of Economics, Jadavpur University ( email )

188, Raja S.C. Mallick Rd, Kolkata 700032
Calcutta, West Bengal 700032
India

Maria Carmen Garcia-Alonso

University of Kent, Canterbury ( email )

Canterbury, Kent CT2 7NZ
United Kingdom

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