Abstract
This paper analyzes how prices in the retail pharmaceutical market affect health care utilization. Specifically, I study the impact of Walmart's $4 Prescription Drug Program on utilization of antihypertensive drugs and on hospitalizations for conditions amenable to drug therapy. Identification relies on the change in the availability of cheap drugs introduced by Walmart's program, exploiting variation in the distance to the nearest Walmart across ZIP codes in a difference-in-differences framework. I find that living close to a source of cheap drugs increases utilization of antihypertensive medications by 7 percent and decreases the probability of an avoidable hospitalization by 6.2 percent.
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