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- Reference pricing with elastic demand for pharmaceuticalsPublication . Gonçalves, Ricardo; Rodrigues, VascoIn this paper, we re‐examine the properties of two commonly adopted government reimbursement schemes for pharmaceuticals: reference pricing and fixed percentage reimbursement. We depart from the previous literature by assuming that the individual demand is price‐sensitive and depends on the copayment rate (i.e., the part paid by each consumer). We obtain two novel results under reference pricing: first, as the copayment rate increases, so do pharmaceutical prices; second, this increase in pharmaceutical prices reduces social welfare. Whilst reference pricing does emerge as a preferable reimbursement scheme, demand elasticities and the copayment rate interact in complex ways. This leads (unexpectedly) to the possibility that a higher copayment rate (lower reimbursement rate) results in higher government expenditure.
- Reference pricing with elastic demand for pharmaceuticalsPublication . Gonçalves, Ricardo; Rodrigues, VascoThis paper analyzes pharmaceutical producers (of branded and generic drugs) pricing de- cisions in a context which combines the classical Hotelling framework (commonly adopted in the literature) with the possibility that consumers demands are price elastic. We analyze with particular interest two commonly adopted reimbursement mechanisms: xed percentage reim- bursement (FPR) and reference pricing (RP). We nd that assuming an elastic demand has a signi cant impact under a RP mechanism, as it allows rms to raise their prices when the copayment rate increases. Contrary to previous literature, we show that RP may be worse than FPR in terms of social welfare for su¢ ciently high copayment rates. From a policy viewpoint, our results indicate that the introduction of RP is not necessarily always bene cial (compared to FPR) and thus constitute a model towards which all reimbursement mechanisms should converge.
- A social cost perspective in the wake of the Portuguese strategy for the fight against drugsPublication . Goncalves, Ricardo; Lourenço, Ana; Silva, Sofia Nogueira daThe Portuguese National Strategy for the Fight Against Drugs (NSFAD), approved in 1999, was explicitly grounded on the values of humanism and pragmatism and paved the way for the decriminalization of illicit drug use in Portugal in 2000. This paper presents an analysis of the social costs of illicit drug use in the wake of the strategy's approval. Taking into consideration health and non-health related costs, we find that that the social cost of drugs decreased by 12% in the five years following the NSFAD's approval and by a rather significant 18% in the eleven-year period following its approval. Whilst the reduction of legal system costs (possibly associated with the decriminalization of drug consumption) is clearly one of the main explanatory factors, it is not the only one. In particular, the rather significant reduction of health-related costs has also played an important role.
- Reference pricing in the presence of pseudo-genericsPublication . Gonçalves, Ricardo; Rodrigues, Vasco; Vasconcelos, HélderThis paper looks at producers of branded and generic pharmaceuticals’ pricing decisions under two possible reimbursement schemes—reference pricing and fixed percentage reimbursement—and under two settings—one where the branded producer only sells the (off-patent) branded pharmaceutical and another where, in addition, it may also sell its own generic version, a so called pseudo-generic. We find different pricing responses from firms under the two reimbursement schemes and across the two settings analysed (with or without a pseudo-generic), and show that pseudo-generics may have an anticompetitive effect. Our results have important policy implications such as showing that the presence of pseudogenerics reinforces reference pricing’s advantages over alternative reimbursement schemes
- Rebel with(out) a cause? Inter-generational smoking dependence in Chinese householdsPublication . Gonçalves, Ricardo; Simmons, Peter; Xie, Yuanyuan
- The momentum for network separation: a guide for regulatorsPublication . Gonçalves, Ricardo; Nascimento, ÁlvaroNext Generation Access Networks (NGAs) are a challenge to regulators and operators insofar as they require large investments, there is a significant uncertainty about the ability to recover costs, and the choice of the appropriate regulatory regime is far from consensual. Regulatory authorities might want to seize the moment and reconsider mandatory vertical separation of telecommunication firms, without jeopardizing incentives to innovation and investment. This paper discusses the main elements of a possible test for the adequacy of network separation as a regulatory remedy. A sequential decision tree procedure with three questions is proposed: (1) “Is there significant market power in the provision of access under NGAs?”; (2) “Are there little vertical complementarities between services along the supply chain?”; and (3) “Is network separation a better regulatory tool than any other alternative?”. A positive answer to all the questions implies that the regulator should consider network separation as a regulatory remedy.
- Maintenance incentives in highway concession contractsPublication . Gonçalves, Ricardo; Gomes, AntónioIn most European countries, the private sector has a direct or indirect participation in the construction, overhaul, maintenance, or operation of highways, normally through concession contracts and often with direct payments (tolls) by users. In this context, we construct a model, where demand also depends on road quality, in order to understand the incentives that a profitmaximising concessionaire has to maintain a highway in proper conditions. We provide an economic rationale for our results and also analyse how they are affected by changes in tolls, costs, and the duration of the concession contract.
- Economies of scale and scope in the provision of diagnostic techniques and therapeutic services in Portuguese hospitalsPublication . Gonçalves, Ricardo; Barros, Pedro PitaThis article analyses the provision of auxiliary clinical services that are typically carried out within the hospital. We estimate a flexible cost function for three of the most important (cost-wise) diagnostic techniques and therapeutic services in Portuguese hospitals: Clinical Pathology, Medical Imaging, and Physical Medicine and Rehabilitation. Our objective in carrying out this estimation is the evaluation of economies of scale and scope in the provision of these services. For all services, we find evidence of economies of scale and some evidence of economies of scope. We also find evidence of diminishing returns to management, whereby larger hospitals appear to have surpassed their optimal size. These results have important policy implications and can be related to the ongoing discussion of where and how should hospitals provide these services.
- Anti-competitive impact of pseudo-genericsPublication . Rodrigues, Vasco; Gonçalves, Ricardo; Vasconcelos, HélderIn pharmaceuticals markets, sellers of branded drugs sometimes sell generic versions of their own branded products, either directly or through licenseagreements. Although claims that these pseudo-generics may have anti-competitive effects are not unusual, the theoretical literature on this issue is limited and not conclusive. This paper uses a model that combines horizontal and vertical product differentiation, to explain how those effects may occur. We show that the producer of the branded product will not sell the pseudo-generic unless faced with competition and that, if she does so, in some circumstances, all prices rise to the benefit of all sellers and the detriment of consumers.
- Empirical evidence on the impact of reserve prices in English auctionsPublication . Gonçalves, RicardoWe study the impact of reserve prices on the revenue of English auctions using a unique hand-collected database of virtual football players from the online football management game Hattrick. As theoretically predicted, setting a reserve price entails a trade-off between the cost of setting it too high and having the good go unsold, and the benefit associated with a higher revenue should the reserve price successfully extract surplus from the highest bidder. Overall, we find the net benefit of setting a higher reserve price to be negative, regardless of the value of the reserve price. This is a novel result insofar as previous literature has generally found an insignificant or positive effect of the reserve price on unconditional auction revenue.