Liberalizing the Opening of New Pharmacies and Hospitalizations

We study the impact of legal restrictions pertaining to pharmacy licences on hospitalizations. We use a reform approved in 2012 in Italy that increased the number of pharmacies allowed to operate in the national territory by 8%. We set up a regression discontinuity design exploiting monthly data on hospitalizations within Italian provinces. We find that an 8% increase in the number of pharmacies decreased medical hospitalizations by 1.1% and related expenditures by 1.3%. This drop is mainly driven by short hospitalizations of children and elderly individuals. On average, every new pharmacy prevents 17 medical hospitalizations every year. We do not find an impact on a control group of surgical hospitalizations, and we validate the results with a battery of placebo tests. Pharmacies appear to reduce hospitalizations by giving information to people who would otherwise be admitted to a hospital, and other mechanisms are not supported by the data