--- 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." abstract_translations: fi: "Tässä tutkimuksessa tarkastellaan lääketaksan siirtymistä lääkkeiden hintoihin Suomessa. Tulosten perusteella lääketaksan alentaminen nostaa lääkkeiden tukkumyyntihintoja, ja vain puolet lääketaksan alentamisesta siirtyy vähittäishintoihin. Tutkimuksessa selvitetään myös, kuinka muutokset arvonlisäverokannassa voisivat tasapainottaa lääketaksan laskemisen vaikutuksia markkinoilla." --- # Passthrough of Retail Price Regulation in the Market for Pharmaceuticals **Published:** 2024-12-31 **Categories:** Working Papers **URL:** https://www.etla.fi/julkaisut/working-papers/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. # Lääketaksasääntelyn siirtyminen hintoihin lääkemarkkinoilla #### Tiivistelmä Tässä tutkimuksessa tarkastellaan lääketaksan siirtymistä lääkkeiden hintoihin Suomessa. Tulosten perusteella lääketaksan alentaminen nostaa lääkkeiden tukkumyyntihintoja, ja vain puolet lääketaksan alentamisesta siirtyy vähittäishintoihin. Tutkimuksessa selvitetään myös, kuinka muutokset arvonlisäverokannassa voisivat tasapainottaa lääketaksan laskemisen vaikutuksia markkinoilla. --- ## Additional Information **Kirjoittajat:** Markkanen, Jaakko **Publication Research:** No 64813 **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 **Avainsanat:** Lääkkeet, Hintasääntely **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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