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Quality Regulation and Competition: Evidence from Pharmaceutical Markets

Juan Pablo Atal (), José Ignacio Cuesta () and Morten Sæthre
Additional contact information
Juan Pablo Atal: University of Pennsylvania, Postal: University of Pennsylvania, https://ldi.upenn.edu/expert/juan-pablo-atal-phd
José Ignacio Cuesta: University of Chicago, Postal: University of Chicago, https://economics.uchicago.edu/directory/jos%C3%A9-ignacio-cuesta

No 20/2018, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: We study the effects of quality regulation on market outcomes by exploiting the staggered phase-in of bioequivalence requirements for generic drugs in Chile. We estimate that the number of drugs in the market decreased by 25%, average paid prices increased by 10%, and total sales decreased by 20%. These adverse effects were concentrated among small markets. Our results suggest that the intended effects of quality regulation on price competition through increased (perceived) quality of generics—and therefore reduced vertical differentiation—were overturned by adverse competitive effects arising from the costs of complying with the regulation.

Keywords: Quality regulation; competition; bioequivalence; generic pharmaceuticals (search for similar items in EconPapers)
JEL-codes: I11 L11 L15 L65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-hea, nep-ind, nep-lam and nep-reg
Date: 2018-09-26
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhheco:2018_020

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