Maximum Selling Prices in the Colombian Pharmaceutical Market: An Impact Evaluation

By David Bardey & Arturo Harker (Universidad de los Andes), Daniela Zuluaga (Inter-American Development Bank)

We evaluate the impact of a maximum sellin price regulation implemented in the Colombian pharmaceutical market between 2011 and 2014. Our empirical approach takes advantage of a unique dataset where we observe three sources of variation: i) differences across 18 groups in the Anatomical Therapeutic Chemical (ATC) classification system of the WHO, ii) the existence of regulated (treated) and unregulated (control) groups within each of this 18 ATC groups, and iii) differences in time (before and afte rregulation) for the 18 ATC groups. A triple differences model with fixed time effects and cluster errors is used to identify the impact. We find that the regulation of price ceilings to reduced prices in 3 of the 18 groups and increased the price in 10 of them. We confirm then that the focal point effect of price ceilings can distort this type of regulation. In the case studied, the regulation of price ceilings has contributed to an increase in drug expenses by 30% for the 18 ATC groups considered.

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