Quality Safeguards and Regulation of Online Pharmacies

UPF Economics and Business Working Paper No. 595

29 Pages Posted: 14 Oct 2002

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Multiple version iconThere are 2 versions of this paper

Date Written: March 2003

Abstract

Using econometric evidence, this article confirms that distribution of medicines online is split into two market segments of very diverse quality, and identifies the factors that drive quality and quality assurance in this activity. Unlike fraudulent, 'rogue,' websites, which offer scant guarantees and usually sell just a few medicines without prescription, online pharmacies offering insurance coverage and linked to conventional pharmacies typically sell a whole range of drugs, require third-party medical prescriptions and provide abundant information to patients. It is shown that, where online pharmacies are allowed to act legally, market forces enhance quality, as private insurers require professional standards, and specialized third parties make a business of certifying them. Furthermore, older online pharmacies and those running conventional operations offer higher quality, probably because of reputational investments. Overall, this evidence supports licensing online pharmacies, especially considering that prohibiting them is ineffective against fraudulent sites.

Keywords: E-Commerce, Pharmacies, Quality Assurance, Regulation, Transaction Costs

JEL Classification: I11, I18, K23, L15, L84

Suggested Citation

Arruñada, Benito, Quality Safeguards and Regulation of Online Pharmacies (March 2003). UPF Economics and Business Working Paper No. 595. Available at SSRN: https://ssrn.com/abstract=311553 or http://dx.doi.org/10.2139/ssrn.311553

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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