The Economics of Public Pharmacies: Quasi- and Experimental Evidence from Local Markets

"The Economics of Public Pharmacies: Quasi- and Experimental Evidence from Local Markets" Abstract: Policies to decrease the price of pharmaceuticals are highly debated but evidence about their effectiveness is scarce. We provide the first analysis of a policy that introduces public pharmacies selling pharmaceuticals at reduced prices in local markets in Chile. Using experimental and quasi-experimental methods, we present three findings. First, information about public pharmacies improves consumers' knowledge of the choice set and knowledge about the attributes of alternatives. Second, the opening of a public pharmacy is associated with increased prices and reduced sales in nearby private pharmacies. Third, an analysis of voting decisions for the mayors who opened these pharmacies reveals a positive evaluation of this policy. We conclude that public pharmacies can change the functioning of pharmaceutical markets but information about alternatives is crucial. Felipe Gonzalez Pontificia Universidad Católica de Chile