Price discrimination by pharmaceutical companies across Central American countries

Abstract

Purpose

Price becomes a main instrument for rationing pharmaceutical drugs in Central America as a consequence of pro‐market reforms implemented in the 1980s. Under market‐rationing conditions, people's access to branded drugs does depend on their purchasing power and on the vector of prices they face. The purpose of this paper is to study the regional pricing strategy followed by pharmaceutical firms across Central American countries. These countries differ in such economic factors as per capita income, income distribution, market size, and nature and extent of their social‐security system; thus, there are conditions that foster the implementation of price‐discrimination practices across the region.

Design/methodology/approach

The investigation takes advantage of a large database with information about prices of identical drugs sold across Central American countries and produced by 17 large pharmaceutical companies. Regression analyses are used to study whether price discrimination exists in Central American drug markets and what pricing strategies are followed by different pharmaceutical companies.

Findings

Results show that there are significant differences in the prices of identical drugs across the Central American countries, as well as that pharmaceutical companies follow different pricing strategies.

Originality/value

Cross‐country price comparisons are usually based on constructed price indices, which imply losing detailed information about the products being compared. This investigation uses prices of identical drugs, rather than constructed price indices, to study cross‐country price differences by pharmaceutical companies across the Central American region. The study of price discrimination is crucial to understanding how markets end up rationing such an essential product as pharmaceutical drugs.

Citation

Rojas, M. (2009), "Price discrimination by pharmaceutical companies across Central American countries", International Journal of Pharmaceutical and Healthcare Marketing, Vol. 3 No. 2, pp. 118-136. https://doi.org/10.1108/17506120910971704