Regulated Prices, Global Capacity, and Drug Shortages

Abstract

Drug shortages are a problem widely documented around the world. We develop a simple method allowing to identify shortage events and their intensity using sales data at a national level. In the case of prescription drugs, shortages occur when the quantities supplied do not meet demand at regulated prices. Using sales data only, shortages that are driven by supply shocks affect only the lower distribution of sales quantities and can be identified using a demand prediction model estimated on sales observed above a given quantile threshold. We can then measure the likelihood and the magnitude of shortage events. We provide evidence that lower French prices increase the likelihood and magnitude of shortages in France. However, higher prices in the UK seem to have positive spillover effects on reducing the likelihood of shortages, while a negative one when shortages happen and there is competition for scarce resources internationally. Finally, we provide evidence on the heterogeneous effects of shortage reductions achievable through higher regulated prices in France.

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Reference

Pierre Dubois, Gosia Majewska, and Valentina Reig, “Regulated Prices, Global Capacity, and Drug Shortages”, TSE Working Paper, n. 23-1417, March 2023, revised August 2026.