A model for the Dutch pharmaceutical market

This paper develops a general-equilibrium model for the Dutch pharmaceutical market. The model derives the behaviour of patients, pharmacists, drug producers and parallel-importers from microeconomic principles and recognizes the interactions between the various actors. The latter is important since the general-equilibrium effects are sometimes at odds with intuition from a partial-equilibrium approach. A calibrated version of the model is used to evaluate the effects of various policy experiments on the bill for pharmaceutical care in the Netherlands. These experiments include an incentive policy to encourage cost-conscious drug distribution, an increase of copayments for pharmaceutical care, a reduction of trade barriers for parallel-importers, and market entry by producers of generic substitutes.