Voluntary Agreement Economics

In 23 countries, the regulatory framework provided for a review of PRT prices. In Denmark and Ireland, revisions have also taken place at regular intervals, but they are based on a voluntary agreement between public payers and the pharmaceutical industry instead of legislation. Countries with revision or monitoring legislation had either fixed dates or fixed intervals between one month and five years. Of the 26 countries that followed prices and corrected prices, 18 did this exercise regularly, with the remainder on some occasions. The duration of the intervals ranged from 3 months to 5 years. In some cases, regular price controls or revisions are linked to certain medicines: in Norway, the prices of 250 substances representing about three quarters of the value market have been revised each year and, in Spain and Ireland, prices of non-patented medicines have been regularly updated once a year. Five countries (Belgium, Croatia, Denmark, Germany and Hungary) indicated that they did not have regular intervals for price changes. The competent authorities of two countries (Germany and Hungary) have not reviewed and monitored drug prices at all. Despite the existence of the law in Hungary, the details regulation has not yet been implemented at the time of the investigation. Third, companies could play a strategic game with regulators. According to Segerson and Miceli (1998), companies are making voluntary wastewater reductions to avoid the introduction of mandatory controls deemed more costly for a certain level of reduction. Wu and Babcock (1999) add the possibility for the regulator to offer a positive incentive for cooperation, such as providing technical expertise in pollution reduction.

If the regulator provides such a service at a lower cost than it can provide, the company has other reasons to join a voluntary agreement. This document contains taxonomy and models to help integrate the cost-effectiveness of voluntary environmental agreements (AVs) into the typical framework of environmental economics.