Does price-cap regulation work for increasing access to contraceptives? Aggregate- and pharmacy-level evidence from Colombia

Background: Price caps through international reference pricing are widely used around the World, but not so commonly in over-the-counter markets (OTC). We study this type of regulation for the case of oral contraceptives in Colombia, which is a de facto OTC market.
Objectives: We aim to establish whether the regulation triggered a competitive response within and across product categories (active pharmaceutical ingredients). We also study whether regulated products targeted to customers from high socio-economic status are now distributed in pharmacies from low socio-economic neighborhoods.
Methods: First, we use a fixed effects linear panel model to estimate the change in prices and quantities associated with the new regulation for regulated and non-regulated products using administrative data at the wholesale level, according to three price tiers. Second, we conducted an audit study with 213 community pharmacies in the city of Bogota, Colombia. ´ We visited pharmacies twice, before and after the introduction of the price cap, collecting information on prices and availability of six selected brands.
Findings: The wholesale-level analysis reveals a price reduction in regulated and non-regulated products with a regulated active ingredient. Traded quantities increase for the same product types, but only for those in the most expensive categories. Besides, the traded quantities of non-regulated products decrease. Although this price reduction is also transmitted to community pharmacies, the availability of the high-end and mid-range contraceptives included in our audit study decreases as well. We provide suggestive evidence that reduction in the availability of was larger in areas of low socio-economic status.
Conclusions: Price cap regulations that might look as effective in lowering prices and expanding access at the aggregate level could conceal stocking patterns that negatively affect the product availability for the final consumer.