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

Stanford University, Department of Economics

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

José Ignacio Cuesta (Contact Author)

Stanford University, Department of Economics ( email )

579 Jane Stanford Way
Stanford, CA CA 94305
United States
94305-6015 (Fax)

Morten Sæthre

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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