Pharmacy Access and Health-seeking Behavior: Evidence from a Nationwide Policy

Developing countries have wide geographical differences in access to healthcare services. While programs that aim to improve hospital-supporting institutions might improve access for large swaths of the population that cannot access healthcare, they might have an unintended consequence of substitution away from hospitals or clinics to relying on pharmacies for healthcare. Furthermore, unregulated dispensation of medicines may lead to increased incidence of antibiotic resistance in the population who rely on these pharmacies, bypassing healthcare at a hospital or clinic. In this paper, I study a nationwide program in India that improved access to pharmacies by providing cheap generic medicines. Using a difference-in-differences framework relying on geographic variation in access to these pharmacies, I find that exposed respondents are more likely to report receiving some treatment for acute ailments. This increase in healthcare-seeking behavior, however, leads to a shift away from treatment at a hospital or clinic to treatment at a pharmacy. I also find that economically and socially disadvantaged subgroups are more likely to report this substitution pattern, pointing to worsening inequality in access to quality healthcare. I reflect on potential mechanisms driving the main effect and find evidence for finance as a likely mechanism for the observed healthcare-seeking behavior in the exposed population. My main conclusions are robust to a host of empirical checks.