A locational analysis of deregulation policies in the Spanish retail pharmaceutical sector

Abstract

The retail pharmaceutical sector has been characterized in the last decades by profound deregulation policies, aiming at fostering the entry process of new competitors in the market to improve users' access and quality of services. This paper explores the effects of such reforms in the Navarre Region (Spain), where the existing entry restrictions were relaxed in 2000. Using a GIS-based methodology and very disaggregated real data, we show that the massive entry of new pharmacies improved users' access in urban and rural areas but led to intense agglomeration of competitors within limited distances, thus failing to result in a more fair spatial competition. We then propose solving a mathematical programming model that can support policy-makers for an ex-ante assessment of the (spatial) effects determined by changing regulatory frameworks. Results from our computational experiments demonstrate that, if adequately oriented at guaranteeing predefined minimum profitability to new entrants, spatial deregulation policies may result in win-win scenarios for both users and pharmacies. Indeed, the obtained solutions (almost) perfectly replicate the current accessibility conditions while ensuring more equitable market shares’ distribution.