Pricing behaviour of pharmacies after market deregulation for OTC drugs: The case of Germany

ObjectiveTo examine the price reactions of German pharmacies to changes made to OTC drug regulations in 2004. Prior to these changes, regulations guaranteed identical prices in all German pharmacies.MethodsTwo years after market deregulation, 256 pharmacies were surveyed to determine the retail prices of five selected OTC drugs. A probit regression model was used to identify factors that increased the likelihood of price changes. In addition, 409 pharmacy consumers were interviewed to gather information on their knowledge of the regulatory changes and to better explain consumer behaviour.ResultsData was collected on a total of 1215 prices. Two years after deregulation, 23.1% of the participating pharmacies had modified the price of at least one of the five OTCs included in our study. However, in total, only 7.5% of the prices differed from their pre-deregulation level. The probit model showed that population density and the geographic concentration of pharmacies were significantly associated with price changes. Interestingly, the association with the geographic concentration of pharmacies was negative. The consumer survey revealed that 47.1% of those interviewed were aware of the deregulation.ConclusionsOur findings indicate that, two years after deregulation, very few pharmacies had made use of individual pricing strategies; price competition between pharmacies in Germany is thus taking place only a very small scale.