Intended and Unintended Consequences of Drug Price Regulations

Policy makers in many developing countries use maximum price or markup policies to control pharmaceutical costs, which represent 20--60% of their overall healthcare expenditure. We study the price effect of price ceiling policies by exploiting a major policy shift in China: the elimination of longstanding ceilings on retail drug prices. We collect weekly price and characteristics data on over 4,500 drug SKUs from a leading pharmacy chain. By...