A spatial analysis to evaluate the impact of deregulation policies in the pharmacy sector: Evidence from the case of Navarre

Abstract

Community pharmacies represent unusual enterprises as their main function is intrinsically related to the provision of healthcare services. Hence, market competition in this sector needs to be regulated, in order to ensure equitable accessibility, efficiency and quality of services. However, recently a general deregulation trend may be observed in Europe. In this paper, we focus on location restrictions, i.e. on demographic and geographic constraints to open new pharmacies, and we evaluate the impact of their relaxation. In particular, we analyze the case of the city of Pamplona (ES), where a striking increase in the number of pharmacies occurred, after the introduction of a new regulatory system in 2000. We evaluate, thanks to an in-depth spatial analysis, the evolution of the system to date and the effects produced on the consumers, in terms of accessibility, and on the competitors, in terms of market shares distribution. By comparing the obtained results with the ones related to the case of a second Spanish city, characterized by more strict restrictions, it emerges that the deregulation risks to produce a limited improvement in terms of accessibility and to exacerbate differences among consumers. Moreover, an increasing number of competitors does not necessarily imply a more equitable distribution of market shares, thus putting at risk the desired effects in terms of cost reduction and service quality improvement.