Quality Regulation and Competition: Evidence from Pharmaceutical Markets

74 Pages Posted: 9 Oct 2018 Last revised: 9 Nov 2018

See all articles by Juan Pablo Atal

Juan Pablo Atal

University of Pennsylvania

José Ignacio Cuesta

Department of Economics, University of Chicago

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, L65

Suggested Citation

Atal, Juan Pablo and Cuesta, José Ignacio and Sæthre, Morten, Quality Regulation and Competition: Evidence from Pharmaceutical Markets (September 26, 2018). NHH Dept. of Economics Discussion Paper No. 20/2018. Available at SSRN: https://ssrn.com/abstract=3263514 or http://dx.doi.org/10.2139/ssrn.3263514

Juan Pablo Atal

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

José Ignacio Cuesta

Department of Economics, University of Chicago ( email )

1126 E 59th Street
Chicago, IL 60637
United States

Morten Sæthre (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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