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

Price caps through international reference pricing are widely used worldwide but not so commonly in over-thecounter markets. We study the short-term effects of a price cap regulation for oral contraceptives in Colombia, a
market dominated by the presence of several branded generics with multiple active ingredients. Most of the
regulated products were fourth-generation contraceptives, and the Colombian health benefits plan only covers
second-generation ones, resulting in a de facto over-the-counter market. Our aim is to establish whether the
regulation triggered a competitive response within and across product categories, by price levels and regulatory
status. The panel data analysis of quarterly level data for 52 drugs (and 79 drugs in an expanded sample without
transactions for some quarters) reveals a massive expansion of transactions, for the directly regulated products
that were formerly the most expensive, and for the indirectly regulated (i.e., a regulated ingredient) among those
with an intermediate price. Although this price reduction could have led to a crowd out of the publicly provided
contraceptives, we show that this is not the case. Since the information system cannot trace the final consumers’
purchases, we complement our analysis with an audit study involving 213 pharmacies in Bogota. We find that the
price reduction was effectively transmitted to the final consumers.