Charaterization of discriminating-induced Pharmaceutical price dispersion

Abstract

Price dispersion is theoretically stemmed from two sources: cost difference and discrimination. Dispersion driven from cost difference is justified, while discriminating-induced price dispersion needs further inquiry for monitoring. This study was aimed to characterize the types and assess the extent of discriminating induced-price dispersion in pharmaceutical market. The effect of some market structure variables on the extent of discriminating induced-price dispersion was explored. Five pharmacological groups of drug were selectively included. The 2003 data on purchased quantities and prices of public hospitals under the Ministry of Public Health were obtained from DMSIC, the Ministry of Public Health. Inequality measurements were employed to quantify the extent of price discrimination, but incompatibilities of the context and measurement were detected. Overcoming the occurred divergence, the Miscellaneous Acquisition Capability (MAC) approach was purposively originated in this study. Through the MAC approach, inequality measurements became justified and more meaningful for trading context. The overall findings revealed that on the average a half of products analyzed were detected the crucial extent of first degree price discrimination in every market, whereas 33.33% were indicated the existence of third degree price discrimination. Only 10% of these price differences were explained by market structure variables which also confirmed the MAC concept. Additionally, under the MAC approach, market’s price schedule was estimated to facilitate the determination of optimal prices for series of purchasing sizes. This study concluded with portraying the instant and long run applications of the MAC approach, which was strongly convinced as an effective model for price behavior monitoring and strengthening public acquisition efficiency.