Quality Regulation and Competition: Evidence from Pharmaceutical Markets

68 Pages Posted: 10 Oct 2018

See all articles by Juan Pablo Atal

Juan Pablo Atal

University of Pennsylvania

José Ignacio Cuesta

Morten Sæthre

Norwegian School of Economics (NHH)

Multiple version iconThere are 2 versions of this paper

Date Written: September 26, 2018

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

JEL Classification: I11, L11, L15

Suggested Citation

Atal, Juan Pablo and Cuesta, José Ignacio and Sæthre, Morten, Quality Regulation and Competition: Evidence from Pharmaceutical Markets (September 26, 2018). Available at SSRN: https://ssrn.com/abstract=3255853 or http://dx.doi.org/10.2139/ssrn.3255853

Juan Pablo Atal

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Morten Sæthre

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

No contact information is available for José Ignacio Cuesta

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