Competition and Market-Entry Into the Swedish Pharmacy Market : A study on municipality level between 2011-2016

Abstract: Between the 1970s and 2009 the Swedish pharmacy market was characterized by a governmental monopoly with Apoteket AB as the only market-actor. By the year 2009, market reforms and re-regulations allowed private companies to enter the pharmacy market. Still, pertaining to existing regulations (e.g the pricing of prescription drugs) the market cannot be described as entirely free. The purpose of this thesis was to examine how competition affects market-entry decisions. More precisely, how the number of pharmacy chains in a municipality affects the probability of a new pharmacy being opened. Conversely, the effect of competition on market-exit was also addressed. Using yearly data on municipality level, the sample incorporates all 290 Swedish municipalities, of which 287 were examined. The excluded municipalities are Stockholm, Göteborg and Malmö. The main estimations were made by means of Poisson regressions. Additionally, all estimations were also regressed using the Negative Binomial method. This study reports a negative relationship of market-entry and the number of existing pharmacy firms in a municipality of average size. Market Exit is on the other hand positively correlated with the number of pharmacy chains in an average municipality.