NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Banning Foreign Pharmacies from Sponsored Search: The Online Consumer Response

Matthew Chesnes, Weijia (Daisy) Dai, Ginger Zhe Jin

NBER Working Paper No. 20088
Issued in May 2014, Revised in August 2015
NBER Program(s):IO

Increased competition from the Internet has raised concerns for the quality of online prescription drugs. Given the illegality of importing unapproved prescription drugs into the U.S. and the pressure from the Department of Justice, Google agreed to ban pharmacies non-certified by the National Association of Boards of Pharmacy (NABP) from sponsored search listings. We study how the ban on non-NABP-certified pharmacies from sponsored search affects consumer search on the Internet. Using click-through data from comScore, we find that non-NABP-certified pharmacies receive fewer clicks after the ban, and this effect is heterogeneous. In particular, pharmacies not certified by the NABP, but certified by other sources (other-certified sites), experience a reduction in total clicks, and some of their lost paid clicks are replaced by organic clicks. In contrast, pharmacies not certified by any of the four major certification agencies suffer a greater reduction in both paid and organic clicks. These results suggest that the ban has increased the search cost for other-certified sites, but at least some consumers overcome the search cost by switching from paid to organic links. In addition to search cost, the ban may have increased concerns for uncertified sites and discouraged consumers from reaching them via both paid and organic links.

download in pdf format
   (798 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20088

Users who downloaded this paper also downloaded* these:
Herskovic, Kelly, Lustig, and Van Nieuwerburgh w20076 The Common Factor in Idiosyncratic Volatility: Quantitative Asset Pricing Implications
Bate, Jin, and Mathur w17955 In Whom We Trust: The Role of Certification Agencies in Online Drug Markets
Bennett and Yin w20091 The Market for High-Quality Medicine
Wozniak w20095 Discrimination and the Effects of Drug Testing on Black Employment
Elfenbein, Fisman, and McManus w20074 Market Structure, Reputation, and the Value of Quality Certification
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us