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Umbrella branding is a marketing practice whereby multi-product firms leverage their reputation across different product categories. This paper investigates how advertising in the market of over-the-counter (OTC) drugs affects the decision to buy prescription drugs from a promoted brand name. I exploit specific charac- teristics of market regulation in Germany to identify the effect of advertising and find positive effects of umbrella branding on sales of prescription drugs. Umbrella branding results in market expansion, particularly for generic firms which invest in OTC drug advertising. If the effect leads to more consumers of generic substitutes or to more patients in undertreated therapeutic areas, market expansion can have a positive effect on welfare.

Health insurances curb price insensitive behavior and moral hazard of insureds through different types of cost-sharing, such as tiered co-payments or reference pricing. This paper evaluates the effect of newly introduced price limits below which drugs are exempt from co-payments on the pricing strategies of drug manufacturers in reference price markets. We exploit quarterly data on all prescription drugs under reference pricing available in Germany from 2007 to 2010. To identify causal effects, we use instruments that proxy regulation intensity. A difference-in-differences approach exploits the fact that the exemption policy was introduced successively during this period. Our main results first show that the new policy led generic firms to decrease prices by 5 percent on average, while brand-name firms increase prices by 7 percent after the introduction. Second, sales increased for exempt products. Third, we find evidence that differentiated health insurance coverage (public versus private) explains the identifed market segmentation.

Diese Studie zeigt, dass die Maximierung der sozialen Wohlfahrt, also die Verfügbarkeit von innovativen und günstigen Produkten in Europa, durch eine Korrektur der tatsächlichen Abgabepreise in anderen Ländern gemäß der wirtschaftlichen Leistungsfähigkeit [und nicht nur des Preisniveaus] erreicht werden kann. Die im Rahmen des AMNOG vorgesehene europäische Preisreferenzierung für innovative Arzneimittel in Deutschland macht durch eine Gewichtung mit dem BIP pro Kopf eine wohlfahrtsoptimale europäische Preisgestaltung möglich. Ergebnisse einer Berechnung am Beispiel des Onkologikums Zytiga® [Abirateronacetat] zeigen, dass europäische Arzneimittelpreisdifferenzen von bis zu 38% möglich sind, ohne den Referenzpreis in Deutschland unter ein sozial optimales Niveau zu senken.

Many countries with national health care providers and health insurances regulate the market for pharmaceuticals to steer drug demand and to control expenses. For example, they introduce reference pricing or tiered co-payments to enhance drug substitution and competition. Since 2006, Germany follows an innovative approach by differentiating drug co-payments by the drug's price relative to its reference price. In this two-tier system, prescription drugs are completely exempted from co-payments if their prices undercut a certain price level relative to the reference price. We identify the effect of the policy on the prices of all affected prescription drugs and differentiate the analysis by firm types (innovative, generic, branded generic or importing firms). To identify a causal effect, we use a differences-in-differences approach and additionally exploit the fact that the exemption policy had been introduced successively in the different clusters. We use quarterly data from 2007 to 2010 and find empirical evidence for differentiated price setting strategies by firm types, ranging from price decreases of -13.1% (branded generics firms) to increases of +2.0% (innovators) following the introduction of potential reductions in co-payments. We refer to the latter result as the co-payment exemption paradox. Our competition proxy (no. of firms) suggests a significant but small negative correlation with prices.