Consequences of Government Regulations in the Vital and Essential Drugs Market

How harmful can government regulations and protectionism be? I provide evidence of a sizeable negative impact of government interventions on the most objective measure of health, mortality. The Russian government implemented a strategy to increase the market share of Russian pharmaceutical drugs and set price limits for a large group of drugs. Starting in 2012, domestic generic drugs included in public health programs were launched and branded foreign drugs for those diseases gave up their leading market positions. In 2014, the administration of the social provision of drugs was given to regional authorities. And in 2015, protectionist policies were implemented in public procurement auctions. I argue that after 2012 the mortality rate for the diseases most affected by public programs changed from a declining trend to an increasing one, while all-population mortality from the rest of the diseases and infant mortality continued to decrease. Starting in 2014, the growth became more dramatic. To avoid bias from rates for different diseases being of different orders of magnitude, I use real values for each disease, with 2011 as a reference period. The real mortality rate for the diseases most affected by public programs is 80.7 p.p. higher than infant mortality (in other words, the growth is almost twice higher) and 57.7 p.p. higher than all-population mortality from other diseases after 2014. Moreover, the growth is more notable for some problematic regions, the elderly population, and rural areas.