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Quality safeguards and regulation of online pharmacies

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Abstract

Using econometric evidence, this article confirms that distribution of medicines online is split into two market segments of very diverse quality, and identifies the factors that drive quality and quality assurance in this activity. Unlike fraudulent, ‘rogue,’ websites, which offer scant guarantees and usually sell just a few medicines without prescription, online pharmacies offering insurance coverage and linked to conventional pharmacies typically sell a whole range of drugs, require third-party medical prescriptions and provide abundant information to patients. It is shown that, where online pharmacies are allowed to act legally, market forces enhance quality, as private insurers require professional standards, and specialized third parties make a business of certifying them. Furthermore, older online pharmacies and those running conventional operations offer higher quality, probably because of reputational investments. Overall, this evidence supports licensing online pharmacies, especially considering that prohibiting them is ineffective against fraudulent sites.

Suggested Citation

  • Benito Arruñada, 2001. "Quality safeguards and regulation of online pharmacies," Economics Working Papers 595, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2003.
    • Handle: RePEc:upf:upfgen:595
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    References listed on IDEAS

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    Cited by:

    1. Benito Arruñada, 2005. "Managing competition in professional services and the burden of inertia," Economics Working Papers 827, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Ahlert, Dieter & Heidebur, S. & Michaelis, Michael, 2007. "Kaufverhaltensrelevante Effekte des Konsumentenvertrauens im Internet: Eine vergleichende Analyse von Online-Händlern," Working Papers 48, University of Münster, Competence Center Internet Economy and Hybrid Systems, European Research Center for Information Systems (ERCIS).

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    More about this item

    Keywords

    E-Commerce; pharmacies; regulation; quality assurance;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services

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