Competitive Environment and R&D of Pharmaceutical Companies under Public Medical Insurance
Satoshi Nakanishi (Associate Professor, Department of Economics, Nihon Fukushi University
and Chief Researcher, Pharmaceutical Industry Policy Institute)
Shinpei Tandoh (Senior Researcher, Pharmaceutical Industry Policy Institute)
(No.6: Published in March 2001)
This study evaluates the impact of the introduction of the R-zone system in Japan on price dominance in the pharmaceutical market and resource allocation for R&D investment. A simple model of the public medical insurance reference drug price system is developed, and the impact on the competitive environment of the market is empirically analyzed using the Panzor-Rosse test. As a result, we conclude that the ethical drug market has changed markedly competitively since 1992, when the reference drug pricing system for medical insurance was revised. We also attempted to empirically analyze the relationship between changes in the NHI drug pricing system and the R&D activities of pharmaceutical companies by creating a simultaneous equation model from the perspective of the allocation of funds and budget decisions of companies. As a result, we concluded that changes in the NHI drug price calculation method do not affect the R&D behavior of pharmaceutical companies, but that reductions in base drug prices themselves have the effect of increasing the propensity of companies to develop new drugs through the deterioration of the profitability of existing drugs.