Price discrimination in the Italian medical device industry: an empirical analysis

In this paper we ascertain that the Italian market for medical devices is characterized by significant price dispersion. We have, therefore, carried out an econometric analysis, as well as a Bayesian network analysis to verify if price dispersion is due to price discrimination. We have found that ASLs (Aziende Sanitarie Locali) incur higher procurement costs than AOs (Aziende Ospedaliere), which purchase larger quantities as Centralized purchasing agencies do. Consequently, second-degree price discrimination may be one of the causes of price differences. Price levels are also inversely related to product age because of intense innovative activity, making product differentiation more likely than price discrimination. Public procurement agents located in Southern Italy pay higher prices than those located in Northern or Central Italy. This is due to the higher probability for Southern procurement agents to purchase from independent wholesalers, rather than from producers, implying a double marginalization effect which raises final prices. It is also more likely that obsolete medical devices are sold to Southern health care providers.