PRICE DISCRIMINATION IN PHARMACEUTICAL INDUSTRY

Abstract

This paper examines the concept of price discrimination in the pharmaceutical industry, with particular emphasis on international price discrimination and its implications for social welfare. Price discrimination occurs when firms charge different prices for the same product to different groups of consumers based on factors other than production costs. Due to the high research and development costs associated with pharmaceuticals, price discrimination has become a common pricing strategy across countries with varying levels of income and demand elasticity. The study reviews theoretical and empirical literature on the relationship between price discrimination, market efficiency, and social welfare. It also analyzes differences in pharmaceutical prices between countries, particularly the United States and Canada, and explores the factors contributing to these disparities. The findings suggest that international price discrimination is largely driven by differences in demand elasticity and countries’ economic conditions. While price discrimination can increase output, encourage innovation, and improve access to medicines, it may also raise concerns regarding equity and affordability. The paper concludes that the impact of price discrimination on social welfare depends on market conditions and the balance between efficiency gains and distributional effects.