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.