Tougher rules on mandatory substitution brought forth price drop in the Swedish pharmaceutical market -Estimating the impact of the new rules of 2009 using Difference – in - Difference regression.

Abstract

In 2009 the governmental monopoly on the Swedish pharmaceutical market was abolished. Coinciding with this reform, a new set of rules and proceedings concerning mandatory substitution was adopted. In this paper a difference in difference analysis is applied in order to estimate the immediate impact of theses new rules on the prices of the pharmaceuticals. The result was an estimated average prices drop of 4.9% among products facing generic competition. Further inquiries into the factors behind the effect, points to a pattern of price drops increasing with the number of competitors a product faces. A pattern such as this could be indicative of low levels of competition within a market.