• Dorte Bülow Keld
4. term, Master of Public Administration (Continuing Education) (Continuing Education Programme (Master))
The project has focused solely on the hospital-applied pharmaceuticals, since the cost to this kind of medicine is increasing every year due to development of very expensive treatments to cancer, autoimmune diseases etc. But what factors influence the final price given by the seller in a Danish context?
The theory used has been theory on micro economy, where factors about what kind of market describes the Danish pharmaceutical market best; competitive market, monopolistic competition, oligopolistic competition and absolute monopoly. This includes market-failure and market-power and theory of pricing.
The project has been conducted as a qualitative part with interviews with representatives from 3 different private pharmaceutical firms and 2 representatives from Amgros, the Danish public representatives. All with responsibility for negotiating prices on pharmaceuticals. The project also includes a quantitative part with data from Amgros of the results of the negotiation and price-setting from 2016.
The project shows that monopoly on medicine is a significant factor in favor of the seller in pricing. But that monopoly is a relative size, which can vary both in time and geography. Monopoly is related to in what extent the medical profession recognizes other pharmaceuticals or treatments as alternatives at a given time and location, more than related to a strict legal monopoly as f ex. patented pharmaceuticals. Still for many of the hospital-applied pharmaceuticals the market is equivalent to absolute monopoly or oligopolistic competition with few firms producing the pharmaceutical. And since demand (the number of patients) and cost (development, legalization and marketing) to some extend are better known in advance by the pharmaceutical industry in compare with other industries, the pricing is profit-maximizing. Often as a combination of the price on the best alternative treatment, added with some kind of maximum pricing of the advances the new pharmaceutical gives. This is related to the national cost of health services and will therefore be set as a nationally reference-price.
Denmark is a small country, and even the fact that there in relation to negotiating prices on pharmaceuticals is monopsony, with Amgros as the sole negotiator, the Danish market is too small in itself to affect the market and the price. However Denmark is known to be very innovative in relation to implementing new medical treatment with a high political attention and economical resources. So therefore the Danish national reference-price is often set high by the pharmaceutical firms, since it than will be used by other countries as an indicator for setting their reference-price. The final price however is a result of seller (the firms) and buyer (Amgros) negotiating a discount in relation to the reference-price. And it seems that the pharmaceutical firms are willing to give discount especially where there are related pharmaceuticals and the monopoly is weak. Maybe not to win the Danish market in itself, but more to get the pharmaceutical registered with a high reference-price, which can be used on the bigger EU-countries as Germany, France, Italy etc. So Denmark might even get relatively low final prices on pharmaceuticals despite the high reference-price.
So the theory of micro economy in relation to market and pricing is useful to describe the market for hospital-applied pharmaceuticals in Denmark, but the key-factor is describing to what extend the pharmaceutical has monopoly. This has great influence on both the reference-price and the final price. The reference-price is in itself important for the pharmaceutical firms, and maybe more important than the final price, in a small but innovative country like Denmark.
SpecialisationThe Organisation and Management of Danish Public Health Service
Publication date15 Jun 2017
Number of pages59
ID: 258809622