Primary Research Focuses: Industrial Organization, Public Economics

Secondary Research Focuses: Applied Microeconomics, Household Finance

References: 

• Jean-Pierre Dubé (Committee Chair)
• Ali Hortaçsu
• Milena Almagro

Job Market Paper: "Retail Pharmacy Closures and the Declining Drug-Retail Complementarity"

[Abstract] Recent retail pharmacy closures have raised concerns about "pharmacy deserts" and unequal access to prescription drugs, prompting state and local governments to propose policies to improve drug margins. This paper shows that these closures stem less from declining drug profitability and more from the breakdown of the historical complementarity between prescription drugs (Rx) and consumer packaged goods (CPG). Using a novel database linking pharmacy sales, prices, and margins, as well as consumer shopping behavior, I document that the U.S. pharmacy market consists of two distinct business models: multi-product chain pharmacies ("chains") that rely on CPG sales to offset low Rx margins, and small independent pharmacies ("independents") that focus almost exclusively on dispensing drugs. Four empirical facts emerge: (i) exits are concentrated among chains, (ii) exits temporarily reduce local drug adherence, (iii) exits occur mainly in already unconcentrated markets, and (iv) exit rates track declining CPG sales more than falling Rx margins. To evaluate the impact of proposed Rx price reform policies, I develop a dynamic oligopoly model in which pharmacies choose entry, format, and pricing while payers set uniform Rx reimbursements. Counterfactuals show that raising Rx margins would require large subsidies with limited welfare gains, countering the argument that policies aimed at reducing health inequality by improving drug compliance should prioritize the pharmacy channel and hence rely on boosting drug profitability as a primary lever.