--- title: "Passthrough of Retail Price Regulation in the Market for Pharmaceuticals" authors: - name: "Markkanen, Jaakko" url: "https://www.etla.fi/henkilot/markkanen-jaakko/" sameAs: - "https://orcid.org/0000-0002-4743-7790" - "https://scholar.google.com/citations?user=S810psIAAAAJ" - "https://x.com/JaakkoMarkkanen/" - "https://markkaj.github.io/" date_published: "2024-12-31" series: "ETLA Working Papers" series_number: "123" issn: - "2323-2420" - "2323-2439" jel_codes: - "I11" - "H51" - "L51" - "C23" language: "en" publisher: "ETLA Economic Research" pdf_url: "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-123.pdf" keywords: - "Pharmaceuticals" - "Passthrough" - "Price regulation" identifier: "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-123" abstract: "I study the transmission of pharmacy mark-ups to retail prices and the policy between retail markups and Value Added Tax (VAT) rates in Finland. My reduced form evidence demonstrates that pharmaceutical manufacturers respond to a decrease in the regulated pharmacy mark-ups by increasing their wholesale prices. I estimate a structural model of pharmaceutical supply and demand using data from the Finnish statin market. I show that only half of the decrease in the pharmacy-markup was transferred to retail prices. I also demonstrate that the government can address the increase in manufacturer revenues by increasing the VAT rate for pharmaceuticals." --- # Passthrough of Retail Price Regulation in the Market for Pharmaceuticals **Published:** 2024-12-31 **Categories:** Working Papers **Tags:** ETLA-WEF **URL:** https://www.etla.fi/en/publications/working-papers-en/passthrough-of-retail-price-regulation-in-the-market-for-pharmaceuticals/ #### Abstract I study the transmission of pharmacy mark-ups to retail prices and the policy between retail markups and Value Added Tax (VAT) rates in Finland. My reduced form evidence demonstrates that pharmaceutical manufacturers respond to a decrease in the regulated pharmacy mark-ups by increasing their wholesale prices. I estimate a structural model of pharmaceutical supply and demand using data from the Finnish statin market. I show that only half of the decrease in the pharmacy-markup was transferred to retail prices. I also demonstrate that the government can address the increase in manufacturer revenues by increasing the VAT rate for pharmaceuticals. --- ## Additional Information **Kirjoittajat:** Markkanen, Jaakko **Publication Research:** No 65321 **Kansikuva:** https://www.etla.fi/wp-content/uploads/etla-working-papers-123-kansi.jpg **Lataa Pdf:** https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-123.pdf **Key Words:** Pharmaceuticals, Passthrough, Price regulation **Jel:** I11, H51, L51, C23 **Paivays:** 31.12.2024 **Sivuja:** 54 **Kieli:** en **Sarja:** ETLA Working Papers **Sarja Nro:** 123 **Issn:** 2323-2420, 2323-2439 (Pdf) **Saatavuus:** 2 ## Bibliographic metadata (JSON-LD) ```json { "@context": "https://schema.org", "@type": "ScholarlyArticle", "@id": "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-123", "headline": "Passthrough of Retail Price Regulation in the Market for Pharmaceuticals", "inLanguage": "en", "publisher": { "@type": "Organization", "name": "ETLA Economic Research", "url": "https://www.etla.fi", "logo": { "@type": "ImageObject", "url": "https://www.etla.fi/wp-content/uploads/logo-etla_logo.svg" } }, "datePublished": "2024-12-31T00:00:00+00:00", "author": [ { "@type": "Person", "name": "Markkanen, Jaakko", "url": "https://www.etla.fi/henkilot/markkanen-jaakko/", "sameAs": [ "https://orcid.org/0000-0002-4743-7790", "https://scholar.google.com/citations?user=S810psIAAAAJ", "https://x.com/JaakkoMarkkanen/", "https://markkaj.github.io/" ] } ], "abstract": "I study the transmission of pharmacy mark-ups to retail prices and the policy between retail markups and Value Added Tax (VAT) rates in Finland. 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