Quality Regulation and Competition: Evidence from Pharmaceutical Markets
68 Pages Posted: 10 Oct 2018
Date Written: September 26, 2018
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: Suggested Citation