Quality Regulation and Competition: Evidence from Pharmaceutical Markets

Juan Pablo Atal (), Jose´ Ignacio Cuesta () and Morten Sæthre
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Juan Pablo Atal: University of Pennsylvania
Jose´ Ignacio Cuesta: University of Chicago

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: Quality regulation attempts to ensure quality and to foster price competition by reducing vertical di?erentiation, but may also have unintended consequences through its e?ects on market structure. We study these e?ects in the context of pharmaceutical bioequivalence, which is the primary quality standard for generic drugs. Exploiting the staggered phase-in of bioequivalence requirements in Chile, we show that stronger quality regulation decreased the number of drugs in the market by 25%, increased average paid prices by 10%, decreased total sales by 20%, and did not have a significant e?ect on observed outcomes related to drug quality. These adverse e?ects were concentrated among small markets. Our results suggest that the intended e?ects of quality regulation on price competition through increased (perceived) quality of generics were overturned by adverse competitive e?ects arising from the costs of complying with the regulation.

Keywords: Aggregate quality regulation; competition; bioequivalence; generic pharmaceuticals (search for similar items in EconPapers)
JEL-codes: I11 L11 L15 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2019-07-15
New Economics Papers: this item is included in nep-com, nep-hea, nep-ind, nep-lam and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Quality Regulation and Competition: Evidence from Pharmaceutical Markets (2022)
Working Paper: Quality Regulation and Competition: Evidence from Pharmaceutical Markets (2018)
Working Paper: Quality Regulation and Competition: Evidence from Pharmaceutical Markets (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:19-017

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