The Impact of Public Health Sector Stockouts on Private Sector Prices and Access to Healthcare: Evidence from the Anti-malarial Drug Market

In developing countries, public sector health facilities frequently run out of essential medicines ("stockouts"). I test whether anti-malarial drug stockouts affect prices, quality, and overall access to anti-malarial drugs in private sector outlets in Uganda. I combine data from four sources: 1) standardized patient drug purchases; 2) vendor surveys; 3) real customer surveys; 4) public sector supply delivery dates. Using a difference-in-differences approach, I find that stockouts increase private-sector antimalarial drug prices by $0.68, or 35 percent. I find few changes in quality. Real customer characteristics change, suggesting that stockouts lead less educated and poorer customers to drop out of the market. Analysis using the 2016 Demographic and Health Survey additionally shows stockouts reduce treatment at public sector facilities and reduce the likelihood that children receive medicine. My results suggest that stockouts increase prices in the private sector and lead to less equitable health outcomes.