Preprint Not Peer Reviewed

The Impact of Public Health Sector Stockouts on Private Sector Prices and Access to
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Healthcare: Evidence from the Anti-Malarial Drug Market
By: Anne Fitzpatrick1
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June 2021
Abstract:
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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
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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
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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.
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Keywords: Stockout; malaria; public health sector; private health sector; health inequality
JEL: O17; O12; I14; I11
Declarations of interest: none

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1
University of Massachusetts Boston, Department of Economics. Anne.Fitzpatrick@umb.edu. Dr.
Fitzpatrick is grateful for financial support from the following sources: University of Michigan Department
of Economics MITRE grant, NSF Dissertation Improvement Grant (#1260911), the Department of Afro-
American and African Studies at the University of Michigan; the African Studies Center at the University of
Michigan; the Rackham Graduate School’s International Research and Graduate Research Awards, and the
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Center for Public Policy in Diverse Studies Research Grant; Center for International Business Education
Research Grant; and the Center for the Education of Women Research Grant. This project has benefitted
from comments from Achyuta Adhvaryu, Manuela Angelucci, Raj Arunachalam, Emily Beam, Sabrin Beg,
Jishnu Das, Susan Godlonton, Molly Jacobs, Angela Mak, Natalie Malak, Zoë McLaren, Jen Mellor, Jeff
Smith, Rebecca Thornton, and seminar participants at the University of Michigan, University of
Massachusetts Boston, and the CSAE, MIEDC, and NEUDC conferences. I thank Manisha Shah and two
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anonymous referees for their thoughtful feedback. Esther Atukunda and the entire research field staff
provided essential support in implementing this project. I thank UNICEF and Sean Blaschke for sharing the
MTRAC data. This study received ethical approval from the UM-IRB, the MUST-IRB, and the UNCST.
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=3944798
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1. Introduction and Background
Stockouts- the lack of adequate supplies and medicine in public health facilities - are a
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pressing problem in developing countries. In Uganda, where this study takes place, local health
facilities report that during visits 33 percent of essential medicines are unavailable; other studies
have found that 20 percent of public health facilities are out of stock of all anti-malarial drugs
(UNICEF 2015; Masters et al., 2014). Drug stockouts have also been reported in studies from
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Kenya (Sudoi et al., 2012), Mozambique (Wagenaar et al., 2014), Tanzania (Mikkelson-Lopez et
al., 2014), South Africa (Bam et al, 2017) and surveys across Latin America countries (Sued et al.,
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2011). These studies and others show stockouts affect a wide variety of drug classes including
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antimalarial drugs, antibiotics, contraceptives, and anti-retroviral medicines. These papers typically
highlight or measure that stockouts may harm health through unavailable or delayed treatment.
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However, if patients instead seek treatment at more expensive facilities, or travel further to seek
medicines, stockouts may also impact economic outcomes.
In this paper, I estimate the effect of public sector drug stockouts on private sector drug
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prices, quality, and healthcare access. I first use a unique dataset on prices of antimalarial drugs
from three sources (standardized patient purchases, vendor surveys, and exit interviews with real
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customers) collected at 452 randomly selected private sector outlets. Next, I use the nationally
representative 2016 Uganda Demographic and Health Survey (DHS) to collect data on treatment-
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seeking.
To estimate the causal effect of stockouts on prices, quality, and treatment-seeking, I use a
difference-in-difference strategy. I combine information on the timing of deliveries to public

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facilities, exploiting variation across time and differential exposure to likely stockouts within a
small geographic area. I argue that within a small area, markets with a public health facility serve
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as a plausible counterfactual to those without. I also show that the interaction of having a public
health facility and the timing of the stockout is unrelated to other characteristics of the transaction
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unlikely to be affected by stockouts, such as the time of purchase or store characteristics.
I report two primary findings. First, I find that public sector stockouts increase anti-malarial
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drug prices by $0.68, a 35 percent increase over the non-stockout price. I find few changes in
quality, measured by whether the vendor sold the correct dosage or whether the drug is expired,
although there is an increase in the likelihood of advising an antibiotic, which is an unnecessary
medicine in this context and thus a decline in quality. However, stockouts reduce the likelihood of
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a diverted drug in the market by 22 percentage points, which may be interpreted as an increase in
quality since selling stolen medicines is socially sanctioned. Because diverted drugs are priced
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lower, this may explain part of the price increase accompanying stockouts.
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Second, I show that stockouts change the composition of customers who purchase drugs in
the private sector, and whether they purchase drugs at all. During stockouts, customers walk longer
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to arrive at private sector providers, have higher education levels, and have higher income. These
results suggest that the poorest and least educated customers drop out of the market, potentially
because they cannot afford the higher prices. Results are similar using the 2016 DHS, showing that
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my main approach and analysis is not specific to my study area or time period but a more general
phenomenon. Using a similar identification strategy, I show that during times of stockouts,
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caregivers of children under 5 are 7 percentage points less likely to seek care in the public sector,
and instead either seek care in the private sector or go without care. I also find that there is a 4.3
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percentage point increase (61 percent) in the likelihood of a febrile child under 5 not receiving any
medication for their illness, indicating a substantial welfare loss of stockouts for children most at
risk of malarial complications.

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This paper makes three important contributions to the literature. First I contribute new
evidence on the price and quality impacts of stockouts using a plausible identification strategy.
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Despite the frequency with which stockouts have been documented to occur worldwide, there are
few studies causally estimating the non-health effects of stockouts on patients. The majority of
studies on the impacts of stockouts are descriptive, focus on health outcomes, and lack a plausible
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identification strategy. Previous work has documented stockouts affect prescribing behavior of
first-line treatments at public health facilities (Hensen et al., 2011), disrupt access to care and
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increase death among HIV patients (Pasquet et al., 2010), with negative effects on overall treatment
adherence (Moriarty et al., 2018) and tuberculosis cure rates (Koomen et al., 2019). Widespread
shortages of contraceptives may also have increased unintended pregnancies (Barkat et al., 2009).
Few studies estimate the impacts on financial outcomes potentially because of the data
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requirements involved in linking concurrent operations at both public and private facilities.
Furthermore, stockouts at local public health facilities are likely endogenous to other market
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characteristics, making this an empirically challenging question as well. There is only one study
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to my knowledge analyzing the effects on prices or other financial outcomes. Mikkelson-Lopez et
al., (2013) study households in the catchment area of 6 health facilities in Tanzania during times
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when health facilities were and were not out of stock. The authors find that antimalarial drug
stockouts increase total household expenditures by 21 percent; however, this estimate cannot be
distinguished from zero due to low statistical power.

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Second, this paper contributes new empirical evidence of the impact of competition on
health care quality, and specifically competition between public and private providers. Standard
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theories predict that increased competition lowers prices with ambiguous predictions on quality
(Gaynor 2006). I show that public sector healthcare policy and operations directly affect private-
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sector provider behavior. My analysis suggests that a poorly functioning public-health sector
facilitates “price gouging” through supply shocks that result in increased health inequality. I also
link stockouts to inadequate treatment for malaria in children. Improving public-sector service
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delivery improvements may have additional benefits for all patients, even those that primarily
patronize private-sector providers. Improving the availability of medicines and supplies through
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the public sector may additionally lower prices in the private sector—a stated public policy goal—
while maintaining access for vulnerable groups.
This paper is organized as follows. Section 2 provides an overview and relevant
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background of the Ugandan antimalarial drug market and health care system, Section 3 outlines the
conceptual framework and Section 4 describes the data. Section 5 presents the empirical strategy,
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including identification and threats to validity, Section 6 presents the results, and Section 7
concludes with a discussion of the policy implications of this paper.
2. Background
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2.1 Malaria and Antimalarial Drugs
Malaria is a major illness throughout sub-Saharan Africa. In 2018, there were an estimated 228
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million cases and 405,000 deaths worldwide. Uganda (where this study takes place) has the third
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highest rate of malaria incidence in the world, with an estimated 8.6 million cases of malaria for a
population of nearly 42 million (WHO 2018). Although malaria is endemic throughout the country
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year-round, there are seasonal peaks in intensity.
Prompt treatment with first-line anti-malarial drugs is highly effective at reducing morbidity
for all patients and mortality for children under 5. Prompt treatment of malaria may also limit the
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negative effects on income from lost work on adults (Dillon et al., 2020). The WHO recommends
ACTs (artemisinin-based combination therapy) as a first-line treatment for uncomplicated malaria.

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Artemether-lumefantrine (AL), commonly known by the brand name Coartem®, is currently the
ACT that is most commonly used in Uganda. Older medicines, such as chloroquine or
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sulphadoxine-pyrimethamine (“fansidar”), are cheap and available, although no longer effective
due to parasitic drug resistance.

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2.2 The Public Healthcare System in Uganda
In 2001, Uganda eliminated all user fees in public health facilities for essential medicines
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and basic consultation services. As a result, there was a dramatic increase in public sector
utilization. Although the literature has noted that patient expenditures fell substantially following
the elimination of user fees, drug availability and subjective service quality also fell (Nabyonga-
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Orem et al., 2008; Xu et al., 2005; Orem et al., 2011). Similar to other developing countries, public
sector service delivery in Uganda delivery across many developing countries is challenged by high
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rates of staff absenteeism (Banerjee and Duflo, 2006; Björkman et al., 2009), low provider
qualifications and competency (Das and Hammer, 2007; Das, Hammer, and Leonard 2008), and
low provider effort to adequately diagnose and treat illnesses, even among competent providers
(Das and Hammer 2014; Das et al., 2016). Distance to public sector health facilities is also
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frequently mentioned as a challenge. For example, 37 percent of Ugandan women report that
distance is a barrier to accessing healthcare, including 19 percent of urban women (DHS 2016).
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There are insufficient facilities to meet the needs of the population.
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In this paper, I focus on one particular challenge of public health service delivery: drug
stockouts. For example, a large-scale survey in 2013 found only 75 percent of medical sundries, 63
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percent of medicines, and 54 percent of laboratory supplies were available at public health facilities
(MeTA 2014). In an effort to reduce stockouts due to poor inventory management, stock deliveries
in Uganda were transformed into a “push” system for most public facilities in 2009 (Bukuluki et
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al., 2013; MeTA 2014). A kit of medicines and supplies are delivered to the primary district health
facilities six times per year according to a set schedule from National Medical Stores (NMS), in
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Kampala, where drugs are centrally procured.2 Then, drugs are delivered to lower-level health
facility in the district through private contracts. The delivery schedule is inflexible although delays
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are common. Additional supply shipments generally do not occur.
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Hospitals and Health Care Centers IV (i.e., the largest primary health care facilities) have the capacity to
request medicine shipments. Managers at these health facilities may place orders one month ahead of the
delivery date through their district health office, the Ministry of Health, or NMS directly. However, other
studies have found similar stockout rates at health care facilities of all levels, including hospitals and Health
Center IVs which request deliveries (Masters et al, 2014). There are official exceptions for ‘emergency’
deliveries in response to periodic cholera or typhoid epidemics. I lack data or evidence on the frequency with
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which these occur. Given the high and persistent rates of stockouts nationally, these demand-driven deliveries
appear to occur infrequently. Malaria peaks would not qualify as epidemics since malaria is endemic
throughout most of the country all year round.
In addition to supply chain problems, shortages may also arise when free medicines and
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supplies are taken from public sector facilities and sold illicitly in the private sector (known as
“diversion”). In order to deter illegal resale of government drugs packages and tablets are marked.3
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In related work using the same dataset, I estimate that up to 20 percent of outlets stock diverted
antimalarial drugs (Fitzpatrick, 2021).
In my analysis, I use the scheduled NMS delivery date of supplies to district health facilities
to identify periods of likely stockouts at local public health facilities. While measurement error is
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a concern, I later show that there is a correlation between the scheduled delivery date and stock
availability at public facilities. I also show as a robustness check that the same patterns of care-
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seeking in relation to the scheduled delivery date appear in the 2016 DHS.
2.3 The Private Healthcare System

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The private sector consists mostly of drug shops and medical clinics, with a small number
of pharmacies, what I collectively describe as “outlets”. Uganda has approximately 5,000 total
public health facilities, while there are nearly 17,000 drug shops and clinics throughout the country,
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and 440 registered pharmacies (Uganda Bureau of Statistics, 2012). Private sector outlets are
primarily small and informal establishments: 64 percent of outlets in my sample have 1 employee-
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owner, and 76 percent have 1-2 employees.
In this paper, I focus on the effect of public sector stockouts on the private sector for anti-
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malarial drugs. While stockouts affect all drug classes, I focus on anti-malarial drugs because in
this market the public sector and private sector are likely competitors. By contrast, drug shops are
not legally allowed to sell antibiotics or do injections, and thus for common health products like
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3
Each tablet is stamped with “MOH”, and each blister pack has on the back of it “GOVERNMENT OF
UGANDA FOR PUBLIC USE ONLY NOT FOR SALE.” The label on blister packs intended for public
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sector distribution is of a different color than the label for private sector distribution. Evidence suggests that
this practice is socially sanctioned. For example, blister packs are frequently folded to minimize the
prominence of the stamp, and in several purchases it appeared as vendors tried to scratch off the stamp.
long-acting birth control or antibiotics that may also be obtained in the public sector are less likely
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to have an adequate private sector substitute during stockouts. Because malaria also is endemic,
treatment-seeking is common, allowing me to have a sufficient number of people and purchases to
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measure stockout impacts. Between 55-60 percent of caregivers report that they first seek treatment
for malaria in the private sector (Rutebemberwa et al., 2009; DHS 2016).
Global health policy has placed increasing emphasis on leveraging private-sector providers
to expand access to first-line anti-malarial treatment. In 2011, the Global Fund created the
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Affordable Medicines Facility-malaria (AMF-m) as a pilot program that provided large-scale
manufacturer subsidies on a subset of ACTs in select countries to reduce market prices; data
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collection occurred during the period between the AMF-m and the next program phase. As a result
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of these initiatives, access to these drugs has been improved, and private sector prices of ACTs
have fallen. But, antimalarial drug prices remain relatively expensive for the population. There are
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no price regulations on medicines in Uganda.
Ugandans spend approximately 10 percent of their annual consumption on health, half of
which is used for medicine (Okwero et al., 2010). Recent estimates show that 23-38 percent of
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Ugandan households face catastrophic health expenditures (Kwesiga et al., 2015). Despite these
statistics, there is still a large unmet need for antimalarial drug treatment, particularly for children.
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Nearly one-third of symptomatic children (i.e., children with a fever) do not receive any treatment,
likely due to drug stockouts in the public sector and high prices in the private sector (UBOS 2010;
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WHO 2017).
In conjunction with lack of available treatment among at-risk populations, there is
simultaneously a problem of over-treatment. Similar to other developing countries, private sector

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providers are loosely regulated and may lack the legal training and expertise needed for adequate
patient care. Thus, of optimal prescribing practice for malaria such as limiting antibiotic use, or
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advising malaria tests to symptomatic individuals are a key way in which quality is measured, as
these are the dimensions of provider behavior that affect individual and population health.
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3 Conceptual Framework
Private sector drug vendors are monopolistically competitive sellers operating in a market
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with some private firms and some public competitors. Vendors choose the profit-maximizing price
and quantity according to a downward-sloping residual demand curve, setting marginal revenue
equal to marginal cost, as pictured in Figure 1 (Goolsbee et al., 2020). In markets with a public
sector competitor when there is no stockout, the residual demand curve is includes total market
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demand minus the supply of all other firms, including the public sector facility, as denoted in the
graph as RDtypical. Firms may differ in their cost structure, or the shape of the residual demand may
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differ across markets.
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During times of stockouts in the public sector, there are well-established dynamics
affecting market quantity and prices. The public sector competitor temporarily “exits” the market.
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Patients who previously were receiving an in-kind subsidy for medical care must now pay a positive
price (see Appendix Figure A1). Some formerly public-sector patients switch into the private sector
for their purchase; however, patients cannot pay the higher market price and instead go without
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care.
From the perspective of a representative firm there is a demand shock, as the residual
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demand curve changes. The new residual demand curve has a higher intercept and a steeper slope,
reflecting the changes in the composition of demand and the lower amount of competition in the
market, as pictured in RDstockout. The magnitude of price and quantity increases depends upon the
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steepness of the new residual demand curve, which captures the relative substitutability of the
private sector for public sector. Highly segmented markets would lead to smaller shifts in the
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private sector equilibrium. Equilibrium prices and quantity are higher; as demand during stockout
periods becomes steeper, the price effect dominates the predicted quantity increase. That is likely
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the case in the context of antimalarial treatment because it is an essential medicine for an acute
illness. On the other hand, current prices are very expensive for low-income patients, and credit
markets are imperfect, suggesting that it is possible many public sector patrons do not switch to the
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private sector during stockouts. Cohen et al., (2015) find using randomized prices that demand for
antimalarial treatment falls substantially as prices rise. They also find demand specifically falls
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among households with low socio-economic status.
In contrast to predictions on price and quantity, the theoretical effect of competition on
quality is ambiguous and may partially reflect how quality is measured (Gaynor 2006). First, in
many settings prices and quality are positively correlated. For example, there is a robust correlation
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between price and quality as measured by provider effort and time in a variety of low-income health
settings (Das et al., 2016; Gage et al., 2021). However, other work has found competition may
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improve quality while lowering prices. Bennett and Yin (2019) and Björkman et al., (2014) find
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that the introduction of a high-quality competitor improves chemical drug quality and lowers drug
prices. Busso and Galiani (2019) also find that new market entrants improve service quality.
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Nevertheless, increased market power – and similarly few alternative options for patients – may
allow profit-maximizing providers to advise additional unnecessary treatments and services, and
decrease consumer well-being. The tendency of profit-maximizing providers to increase prices or

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advise unnecessary treatment is known as supplier-induced demand, and has been documented in
a variety of health markets because of the information gap that patients have compared to health
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professionals (Evans, 1974; McGuire, 2000). Such “bad” behavior may typically be restrained by
a providers’ concern for developing a reputation for being a quack (Dranove, 1988). But, if public
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sector stockouts encourage patients to seek out new healthcare providers during times of stockouts
then reputation incentives may be diminished.

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4 Data
4.1 Private Sector Data

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In order to estimate the effect of stockouts on prices and quality, I use original data collected
from randomly selected private sector outlets in Uganda as part of a randomized audit study
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described in Fitzpatrick (2020). The data consist of standardized patient purchases, vendor surveys,
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and surveys of real customers; Appendix Table A1 contains a short description of each dataset that
I use in the analysis. The sample includes all private sector drug outlets found during a census
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within 45 randomly selected parishes, stratified by sub-county, in 4 districts (Busia, Bushenyi,
Mbarara, and Rukungiri) and all four divisions of Kampala. 4 The resulting dataset is predominantly
urban with some rural areas. These outlets are located within 128 “markets”, which corresponds to
a village in rural areas and its urban equivalent, a cell. Data were collected from May-August 2013,
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during a period where malaria incidence and likely anti-malarial drug demand was likely falling.
The data collection timeline was not organized in relation to stock availability in the public sector.
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4.1.1 Standardized Patient Purchases
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Two different standardized (“fake”) patients (SPs) visited each outlet to purchase anti-
malarial drugs from study outlets based on a randomly assigned script. SPs purchased the medicines
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for an adult male back at home, and were randomly assigned to either ask for a diagnosis and/or
ask for a recommended treatment. Of 1,126 shopping attempts, the SP interacted with a vendor at
1,016 visits and 933 anti-malarial drug purchases were made at 471 different outlets. The SPs
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followed a drug purchase protocol, which determined the class of anti-malarial drugs that were
purchased. As a result of this protocol, the majority of purchases (86 percent) are AL. Thirty-eight
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percent of purchases occurred during a time when there was likely a stockout in the public sector.
In contrast to earlier work by O’Connell et al., (2011) private-sector stockouts are uncommon
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during my time period, occurring in less than 5 percent of shopping attempts.
After the drug purchases were completed, research assistants inspected all purchases and
recorded identifying information including the brand, dose, expiration date, and whether the drug
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4
Outlets were included if they were private establishments at a fixed location that sell antimalarial drugs for
a profit. This definition does not require that the establishment actually make a profit, but does exclude public
sector and nonprofit health facilities. The study also includes a small number of other types of outlets (e.g.)
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individuals who sell antimalarial drugs out of their homes, or shops that specialize in another market, such
as hardware stores, but also sell antimalarial drugs. However, herbal shops are excluded from the sample
frame, as are charitable or public sector hospitals.
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was diverted. All samples were tested for chemical quality, and I find no substandard drugs (see
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Fitzpatrick 2021 for more details). I show in Fitzpatrick (2021) that the SP data are preferred for
measuring prices paid by consumers, as opposed to vendor or real customer reports.
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4.1.2 Vendor and Real Customer Surveys
After the SP purchases, detailed surveys were conducted with vendors at 452 of the total
of 538 outlets found during the census, an 89% completion rate. Collected data include the vendor’s
background, outlet characteristics, distance (in minutes walking) to public health facilities, and
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numbers of customers. The data also contain a detailed drug inventory of all 1,216 anti-malarial
drugs sold by vendors, including wholesale prices paid. Thirty-two percent of surveys occurred
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during a time when there was likely a stockout in the public sector.
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At the same time the vendor surveys, brief surveys were conducted with a convenience
sample of 824 real customers at 459 drug outlets. Enumerators stood outside the outlet, out of sight
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of the vendor, on selected days and interviewed customers as they were exiting the outlet. The real
customer data include information on customer demographics, travel distance, and shopping
behavior.5 Nearly 42 percent of real customer visits occurred during a time when there was likely
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a stockout in the public sector. 63 percent of real customers report having visited a public sector
outlet, suggesting substitutability across the sectors (not shown). While the number of real customer
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surveys differs across outlets, the mean number of interviews per outlet is 2.5. The most robust
correlate of whether there was a real customer survey at the outlet is the total number of customer
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surveys (not shown). These datasets from vendors, standardized patients, and real customers give
a complete picture of the private sector in randomly selected antimalarial drug markets.
4.2 Public sector deliveries and stocks

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5
Customers were asked to participate in a short survey as they were leaving the establishment on selected
days. The vendor was not aware that customers were being approached subsequent to the encounter. While
a target was set of interviewing a minimum of three customers per outlet, in practice this was not achieved.
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The refusal rate was high at 37 percent. In addition, in some areas it is common for children to be sent to
purchase drugs; our protocol only allowed for adults to be interviewed. The characteristic most associated
with having a real customer interview is the total number of customers. See Fitzpatrick (2019) Appendix.
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While I have detailed information on private sector operations, one limitation of this study
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is that I do not have direct information on operations at public health facilities. Specifically, I do
not know the actual delivery date of drug shipments, or have information on stock inventory at
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district or local public health facilities. Concurrent surveys of public health facilities were not
conducted. Instead, I identify the effect of stockouts on prices and quality by pairing the data that I
collected with publicly available information on delivery dates to district health facilities from the
National Medical Stores. Deliveries are then subsequently made to all local public health facilities
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within the district, once the delivery arrives at the district health facility. Appendix B contains a
copy of the delivery schedule that I use in this analysis. As Appendix B shows, the delivery
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schedule is designed such that deliveries are evenly spaced approximately every 6-8 weeks
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throughout the year for each zone, or groups of adjacent districts. Specifically, the schedules do
not occur more frequently in specific districts/regions of the country, areas with higher malarial
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prevalence do not receive more frequent deliveries than areas with lower prevalence, and deliveries
are not more frequent during malarial peaks. The study districts cover 3 different zones.
4.3 Linking delivery dates and stockouts

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First, I demonstrate that scheduled delivery dates correlate with stockouts at public health
facilities. In 2009, UNICEF created the MTRAC system to increase accountability at public health
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facilities by enabling healthcare workers to report via SMS weekly updates on facility stocks of
ACTs, as well as enable a reporting platform for absenteeism, bribery, or stolen drugs. MTRAC
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was initiated in Uganda in 2011, but did not have full coverage throughout the country until 2014.
UNICEF granted me access to data from 2015; I use data from the first 35 weeks, which is most
similar to the 2013 period during which the data was collected. The data are at the district-week
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level; I do not have information on individual facilities within districts. I estimate the following
event study specification, where the omitted category is the week of the scheduled delivery in that
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district:
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(1) %!" = '# + '$ )ℎ+,, -,,./ 0,12+, + '% )32 -,,./ 0,12+,
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+ '& 45, -,,. 0,12+, + '' 45, -,,. 617,+ + '( )32 -,,./ 617,+
+ ') )ℎ+,, -,,./ 617,+ + 8" + 9 * :!" + ;"
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where each '! measures the outcome Y (proportion of facilities with a complete or partial stockout,
and reporting) for district d during week w in relation to the expected delivery date in that district.
I include X , control variables for the week of the year, in all regressions.
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Results presented in Column 1 of Table 1 show that the scheduled delivery dates are
correlated with drug availability in public health facilities; estimates are graphed in Figure 2.
During the week of scheduled delivery, 19.6 percent of public health facilities within a district are
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completely out of stock of all antimalarials. The median number of health facilities in a district is
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30, although only 15 on average report, translating into 3-6 facilities being completely out of stock
of all ACTs during any given week. In the 2-3 weeks prior to a delivery date, there is a statistically
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significant 2.9-4.4 percentage point increase in the percentage of public health facilities that report
a complete stockout of all ACTs. In the week after the delivery date, there is a 5 percentage point
decrease in the likelihood of having a complete stockout; this average roughly persists to 3 weeks
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after. These patterns suggest that the scheduled delivery date to public sector health facilities is
correlated with anti-malarial drug availability at public health facilities. However, the decrease in
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the likelihood of a stockout is observed prior to the delivery date, suggesting that some facilities
receive stocks prior to the scheduled delivery date.

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Column 2 of Table 1 examines whether the delivery date is correlated with stockouts of
some antimalarial drugs but not all (“partial stockouts”). Partial stockouts are very common: on
average, 44 percent of reporting facilities are out of some types or pack sizes of antimalarial drugs
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at any given weekly report. The delivery shipments are less correlated with the percentage of
facilities with partial stockouts. It is not until two weeks after the delivery date that there is a
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significant decrease in the fraction of public sector outlets reporting a partial stockout. These
estimates suggest that shipments are not specific to what types of drugs facilities need. In other
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words, deliveries reduce the likelihood of complete stockouts, but shortages of specific packs
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remain, potentially due to theft. Finally, MTRAC is a voluntary reporting system, and thus
reporting of stockouts may also change around delivery dates. Column 3 of Table 1 shows that
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delivery dates are also not correlated with reporting on the MTRAC system.
The MTRAC results also are useful for guiding the empirical analysis. These data highlight
that while complete stockouts are more likely before the scheduled delivery date, and particularly
2-3 weeks before, there is substantial measurement error in identifying the stockout period. For
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example, with the observed measurement error it is unlikely that I would have sufficient power to
conduct an event study analysis of the price trajectory by day after stockout. This approach implies
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that my estimates may be attenuated, because some markets may still have a stockout despite the
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standardized patient visit or vendor survey occurring after the delivery date.
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5 Empirical Strategy
Comparing prices or other outcomes before and after the delivery date does not identify
the causal effect of stockouts. Malaria demand is seasonal, and over the period of data collection
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malaria caseloads and malaria prevalence—and so likely anti-malarial drug demand—were falling
(MOH 2015; see Appendix Figure A2). As a result, comparing prices before and after the delivery
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date would confound time-varying factors affecting demand with public sector stock deliveries.
Therefore, I address time-varying trends by employing a difference-in-difference estimation

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strategy, along with a control for the week of data collection in all specifications.
Specifically, I leverage differential exposure to plausibly exogenous demand shocks
generated by public sector shortages. I instead use whether the market within the parish has a public
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health facility as a proxy for exposure to the stockout and the subsequent stock delivery. The ideal
thought experiment would be to compare private sector prices, quantity, and quality during
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stockouts to those same outcomes in the counterfactual where the public sector never runs out of
drugs. However, that situation is not observed. Instead, the effect of stockouts is identified by the
15
interaction of the timing of the transaction (or interview, in the case of outcomes derived from the
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vendor-survey) with whether the local market has a public health facility. I estimate the following
fixed effects specification for transaction or interview ‘t’, in outlet ‘s’ in market ‘m’ within parish
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‘p’:
(2) %+,- = =# + =$ >?@ABC D,EA7ℎ FECBAB7G- + =% HB.,AGI72C.2?7+
+ =& >?@ABC D,EA7ℎFECBAB7G- ∗ HB.,AGI72C.2?7+ + 8. + 9 * :+,- + ;+,-
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where Y represents measures of price, drug quality, provider effort, or other outcomes of interest.
Likely Stockout is a dummy variable indicating whether or not the transaction or interview occurred
during a time in which public health facilities in the district were likely to have a stockout (i.e.,
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before the scheduled delivery date). To construct this variable, I assign each standardized patient
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visit, or vendor interview, to the proximate shipment date in time, where a “1” indicates that the
survey activity was before the shipment date and “0” after.6 PublicHealthFacility is a dummy
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variable for whether or not there is a public health facility in that market, compared to other similar
markets within the same parish p. I include a parish-specific fixed effect to account for any
unobserved time-varying shocks correlated with malaria incidence or malaria demand within a
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parish, helping me to isolate “local area” variation. I also include X, controls for possible
confounding characteristics affecting prices or other market outcomes, such as the establishment
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type, and the week of the year. For transaction-level regressions, I also include the visit order, and
the script that was used to purchase the medicine, and standardized patient fixed effects. All
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standard errors are clustered at the market level to account for the potential correlation of outcomes
within a market. Clustering standard errors at this level, as opposed to the store level, is a
conservative approach to inference. As a robustness check against a potential issue of small

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6
The study time period covers three different delivery dates for the 5 districts. 30 percent of both vendor
surveys and standardized patient visits occurred during a time where there was likely a stockout. However,
because the data were collected at different times, the variation used in each type of analysis varies. For
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example, nearly all standardized patient purchases in one district were during a time when there was unlikely
to be a stockout at public health facilities. Because I use a parish fixed effect in my regressions, that district
is effectively dropped from the regression estimates.
16
numbers of clusters, I also estimate wild cluster bootstrap standard errors following Cameron,
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Gelbach, and Miller (2008). Results are unchanged. Conditional on the validity of the identifying
assumption, b3 identifies the causal effect of stockouts on market outcomes.
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5.1 Validity of the empirical strategy
Whether or not a parish contains a market with a public sector health facility is unlikely to
be random: places where demand for health care is high, or even non-health related factors such as
political patronage may affect public sector health facility placement. It is important to highlight
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that identification in this framework does not require that prices or other variables are equal during
times of stockouts, but that areas with or without a public sector health facility have a similar price
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trajectory in times of stockouts. This strategy is more plausible because by using the parish fixed
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effect, I am comparing price fluctuations in relatively small, geographically contiguous areas that
are closer to the local public health facility from those nearby areas that are further away.
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In Panel A of Table 2, I compare markets with and without a public health facility to
examine how non-random placement of facilities may affect results. 7 Approximately 12% of
markets have one public sector facility present, and none have more than one. Markets are relatively
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small, with a population of about 1,200 on average and a median of 600. Despite the small size of
the markets, there are on average 3.6 private sector outlets in each village, of which approximately
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2 are drug shops. Vendors likely have market power (i.e., are not price-takers). None of these
characteristics are statistically significantly different between markets with or without a public
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health facility. In addition, the presence of a public health facility is not correlated with the
likelihood of being in the sample of parishes (not shown).

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7
Uganda has different types of public health facilities with different capacities (Health Centers II-V). For
example, HCII is expected to provide services to a parish while HCV is expected to accept referrals and
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provide services at the district-level. The data on the level or name of the facility was not recorded, only the
number, and so I am unable to test whether the private sector response differs by the size of the public health
facility.
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Panel B of Table 2 presents characteristics of drug outlets. Outlets have 2.3 employees on
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average, although the median is 1 employee. Vendors report seeing approximate 22 customers per
day. By comparison, in the 2012 Uganda National Household Survey, public sector facilities in the
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study districts report seeing a median of 200 patients per day (UBOS 2018). Using responses on
education and years of experience, I estimate that only about one-third (36 percent) of private
providers have the legal qualifications to dispense medicines based on survey responses to
education qualifications and years of experience; this is the primary characteristic that differs by
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health facility placement. Outlets on average stock 5.3 different types of anti-malarial drugs.
Outlets in general make modest profits– the median value is $77 per month. For context, median
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monthly income among real customers is $96. Providers at private outlets report that the nearest
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private sector provider is within 7 minutes walking distance on average. By contrast, the nearest
public sector provider is 40 minutes away; this difference is the only other characteristic that
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significantly differs between the two samples when controlling for a parish fixed effect. I also
include in this table prices paid by SPs during non-stockout periods; those levels are also
statistically similar. Thus, while in theory there are many potential differences between outlets in
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markets with and without a health facility, the inclusion of a parish fixed effect results in groups
that appear comparable on observable characteristics.8 In addition, it is comforting to note that

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potential bias from these differences will likely work to make our empirical estimates on price more
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8
I use as my primary specification whether or not the market has a public health facility because that is an
objective measure of whether or not the market would be differentially affected. I show that minutes walking
is correlated with health facility placement in Appendix Figure A3. GPS coordinates of outlets were not
collected due to the sensitive nature of data collection, including the measurement of substandard medicines
and other illicit activities. Whether there was a health facility is preferable as compared to distance measured
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in minutes walking because minutes walking is subjective and contains measurement error. For example,
respondents may have difficulty assigning minutes walking because they would typically take transportation,
particularly in urban areas where there are no sidewalks. Some people walk faster than others; many
respondents also are taking care of children while they work which would also affect how fast they move.
Indeed, there is a wide dispersion even within village that is a noisy measure of exposure to public providers.
I graph in Appendix Figure A4 the distribution of the village’s standard deviation of minutes walking to the
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closest facility, showing it is very dispersed. The average standard deviation is 20 minutes, but the largest
standard deviation is 103 minutes. Finally, one measure per village reflects the conceptual framework of a
market-based price analysis.
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conservative. For example, lower profits and closer distance to the free public sector likely reflect
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increased competition due to public sector facilities; that competition would therefore result in
lower prices ceteris paribus. The hypothesis is that the shortages would increase prices—thus, the
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bias works against finding any results. In other words, if “control” areas are also affected by
stockouts, the true difference is larger than what I present in my analysis.
In Appendix Table A2, I compare village and market characteristics by the other source of
variation in this analysis, whether or not the drug vendor survey was before or after the scheduled
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delivery date. This table shows that there are slightly more clinics and pharmacies in the period
preceding the stockout period, and similarly a slight increase in the likelihood that a license was
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displayed (a proxy for formality). Thus, I include a control for establishment type in all
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specifications there is also a slight increase in the distance to the nearest private provider in the
likely stockout period, but the absolute magnitude is small at 1.5 minutes. In Appendix Table A3,
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I conduct a falsification exercise regressions of equation (1) using the standardized patient dataset,
where instead of price, demand, or quality, I instead other characteristics of the outlet or visit as the
dependent variable. Using these “non-outcomes,” I test whether outlet or transaction characteristics
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that are unlikely to be affected by stockouts as another check on whether omitted outlet or
transaction characteristics may instead be causing the observed results. This table shows that all
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non-outcomes collected from the standardized patient survey, including the vendor’s sex, vendor’s
size, the transaction language, the outlet size, the time of day of the visit, and other characteristics
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are indeed not affected by stockouts.
The identification assumption that the scheduled delivery date is uncorrelated with other
factors affecting behavior of shop vendors and consumers is further supported by the institutional
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context. Drug shipments to the district health facilities are centrally coordinated through the
National Medical Stores and the same for all health facilities within the area, so they are
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uncorrelated with individual market (village) characteristics. The delivery schedule is set to deliver
shipments approximately every two months; specifically, the schedule does not change or deliver
19
more frequently during the two seasonal peaks for malaria. Unfortunately, I lack data on the actual
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delivery date, or the contents of the shipment, to each facility. However, even if this data were
available, it would likely be preferable to use the scheduled delivery date rather than the actual
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delivery date in the analysis. The actual delivery date to a local facility is potentially endogenous
to road access, the quality of the facility manager, or consumer demographics that may be correlated
with private sector drug prices or other outcomes.
The second identifying assumption is that demand for antimalarial drugs cannot be fully
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adjusted around potential or actual stockouts, which is supported by three characteristics of malaria.
First, though malaria has two seasonal peaks and is the most common illness in the study area, it is
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difficult for an individual to predict the specific time at which they would need for antimalarial
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drugs. Malaria is endemic year-round and transmission to individuals is highly stochastic. Second,
malaria is an acute illness that can worsen day by day so strategically delaying treatment seeking
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until after the drug shipment is unlikely to be a viable option. Third, hoarding of malaria pills entails
a high opportunity cost due to their high prices in the private sector and Uganda’s underdeveloped
capital markets. Cohen et al. (2015) find that highly subsidizing anti-malarial treatment did not lead
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to hoarding, evidence that patients do not store medicines when they are cheap to use at a later date.
Similarly, public health facilities are unlikely to provide free drugs to healthy patients for hoarding
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because of the opportunity cost of being unable to provide them to sick patients during a shortage.
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6 Results
6.1 Measures of Demand and Private Sector Inventories
Table 3 presents results on the impact of stockouts on demand for antimalarial drugs in the
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private sector. I measure demand by the total number of customers; and the total number of
customers purchasing antimalarial medicines. Because these measures are all taken from the drug
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vendor survey, I run this analysis at the outlet level. For this table, the dummy variable Likely
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Stockout is a 1 when the vendor survey was conducted before the scheduled shipment date (0
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otherwise).
The survey asked about malaria demand two separate instances: first, the total number of
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customers seeking malaria treatment the previous day; second, later during the detailed drug
inventory section where vendors reported the number of customers purchasing every individual
antimalarial drug in the past week, including partial dosages. I find no significant change in any of
these measures of demand, although I caution that all point estimates have wide confidence
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intervals. Point estimates are suggestive, and of the expected positive sign, for the subset of demand
questions that ask about sales of specific items that may be more accurate. Vendors report an
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additional 9.6 more customers purchasing a full dose of AL in the past week (Column 4, p=0.137).
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I find no change in the likelihood of selling partial dosages, either AL or overall; point estimates
are small and close to zero (Columns 5 and 6).

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Table 4 shows that stockouts have little effect on private-sector vendor stocks, either
measured by standardized patient or vendor reports. During times of potential stockouts, vendors
keep the same quantities of antimalarial drugs on hand (Columns 1 and 2), although point estimates
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are positive and there is substantial variability. Vendors typically buy their medicines from
wholesale pharmacies, and so it is possible that stockouts also affect vendors through higher
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wholesale prices, muting any profit effects. However, empirically, point estimates on the drug unit
cost prices that vendors paid for their last inventory are not significantly different from zero,
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suggesting that vendors do not pay higher wholesale prices for the drugs during stockouts (Column
3). This finding may be because vendors adjust their stock purchases to avoid any price fluctuations.
During periods of stockouts, vendors are less likely to stock drugs within the previous 2 weeks but
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instead more likely to order between 2-4 weeks ago, before the public sector shortage starts
affecting their market (see Appendix Table A4). These results suggest that any sales price increases
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observed in purchases by customers would directly lead to higher vendor profits.
6.2 Prices Paid by Consumers
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Next, I turn to the impact of stockouts on prices, taken from standardized patient purchases.
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Table 5 shows that prices paid by private sector customers are higher during stockouts. Prices of
antimalarial drugs are $0.68 higher as a result of stockouts, significant at the 1 percent level
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(Column 1). While level prices may be sensitive to outliers, I show that results are robust to a log
specification. The coefficient on the interaction term is 0.291, significant at the 1 percent level,
suggesting the stockouts increase prices by 35 percent (exponentiated coefficient reported; see
Column 2). I show in Appendix Table A5 that there is no change in the likelihood of a drug
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purchase, and that these results are not driven by substitution across drug types (switching from
fansidar to AL, for example). However, there is evidence (using brand-normalized prices) that part
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of the observed price increase is driven by vendors selling more expensive brands of AL (Appendix
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Table A6), resulting in higher per-drug profit margins.
6.3 Provider Behavior and Quality/Drug Attribute Measures

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One outstanding question from a theoretical perspective is whether the public sector entry
and exit described by stockouts increases or decreases quality in the competing private sector. From
a policy perspective, whether or not stockouts affect the likelihood of purchasing a diverted drug
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is also important for targeting limited resources to address drug diversion. Empirically, I see few
changes in the drug attributes or provider practices during stockouts (Table 5). I find no change in
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the likelihood of being sold an expired drug (Column 3). Perhaps not surprisingly, I observe a 20
percentage point decrease in the likelihood that a standardized patient purchases a diverted drug
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during times of stockouts (Column 4). While diverted drugs are of high quality, these drugs are
illegal and also socially sanctioned, and thus I interpret this change as an increase in quality
(Fitzpatrick 2021). Diverted medicines are also cheaper than non-diverted medicines, and so a
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lower likelihood of drug diversion may also be one mechanism through which prices increase
during stockouts. I find no effect on recommended public health practices, like advising the patient
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to take a malaria test. However, vendors are 10 percentage points more likely to advise antibiotics
for the treatment of malaria, an incorrect and unnecessary treatment that may be interpreted as a
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decline in provider quality as it reflects a desire for medical providers to act in their own interest
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with no benefit to patients. These results are consistent with vendors potentially adjusting to a
composition of demand that may be richer, with more disposable income, by trying to push more
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medicines on them. Together, these estimates suggest that the effect of stockouts on quality is
mixed. Although most measures of quality are unaffected by stockouts, I find that drug purchase is
less likely to be diverted—an improvement in quality—but there is evidence that vendors are more
likely to push unnecessary medicines on patients—a decrease in quality. These findings are
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consistent with two different dynamics on providers as the public sector exits the market. Although
prices and quality are often positively correlated, providers also have relatively more power in the
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interaction due to fewer options for customers, decreasing the incentive to compete over quality.
6.4 Real Customers

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I also collected data on treatment-seeking behavior from real customers. These data largely
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support the competitive assumptions of the analysis. Vendors are monopolistically competitive,
and customers substitute between public and private health facilities. Only 8 percent of customers
report seeking treatment “nowhere else” but the private sector and 68 percent say that they also
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typically seek treatment in the public sector (see Appendix Table A7).
Next, I turn to examining the impact of stockouts on private sector customer demographics
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and behavior, which may be endogenous to stockouts. I re-estimate Equation (1) using data from
real customers collected as they were exiting the study drug outlets. In these regressions, I use the
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date of the interview to measure Likely Stockout, and include controls for establishment type, as
well as parish and week fixed effects. As above, our coefficient of interest – the interaction between
whether the customer’s visit occurred prior to scheduled delivery dates in markets with or without
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a public health facility – captures the impact of stockouts on consumers. Nearly 15 percent of the
sample does not live within walking distance of the outlet and 2 percent of the sample lives over
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one hour walking to the outlet. Therefore, I assign all values above 60 minutes and those who do
not live within walking distance to be 60 minutes.
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In Table 6, I first show that real customers report walking on average approximately 9.4
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minutes further during times of a stockout (Column 1). Among all customers, there is no significant
change in the likelihood that a customer buys an anti-malarial drug, and no significant change in
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price. Customers on average have one more year of education, but income is not different.9
Panel B restricts the same analysis to real customers who reported purchasing an anti-
malarial drug. Due to a relatively low sample size (N=334), this analysis may have issues with
statistical power. While customers still report walking further and approximately the same as in the
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full customer sample, this effect is not statistically significant from zero potentially due to a small
sample (Column 1; p=0.173). However, Column 2 shows that anti-malarial drug customers are
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nearly 31 percentage points more likely to be purchasing a drug for an adult (as opposed to a child).
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They also report paying $0.46 higher prices for their primary product, although this estimate is not
different from zero. Without the inclusion of week-of-survey fixed effects, this estimate is
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statistically significant (p=0.098) and of the same magnitude as the main set of results in Table 7
($0. 68), suggesting that the inclusion of fixed effects may limit statistical power (not shown).
These results are generally consistent with predictions from the Conceptual Framework, although
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with some noise.
The average years of education increases by 4.5 years and monthly income increases by
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$156 during times of stockouts as well. Overall, results suggest that stockouts result in higher prices
and changes in the composition of customers by inducing customers to travel further to obtain
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medicines. Lower-education and lower-income customers appear to drop out of the market. These
patterns are consistent with stockouts negatively impacting consumer well-being and increasing
health inequality, and with predicted changes in consumer demand.

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9
Although price fluctuations may occur for all drugs available in the public sector that may also be purchased
in the private sector, there are some reasons why the impact of stockouts would be larger for antimalarial
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drugs than for other classes of drugs. For antibiotics, for example, half of the sample is drug shops, which
are not legally allowed to sell them. For birth control, individuals may be able to change the timing of their
demand. Treatment for diarrheal disease is very cheap and would be difficult to detect any price fluctuations.
24
6.5 Robustness Checks and Auxiliary Specifications
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Robustness of Main Results
As discussed earlier, the main specification likely has measurement error because the
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dates when new drug supplies appear in public health facilities may not correspond to the
scheduled delivery date. To address this concern, I re-estimate equation (2) without standardized
patient purchases one week before or one week after the scheduled delivery date, examining
periods when there was most likely to be a stockout against periods when there was very unlikely
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to be a stockout. Results are robust, although due to the lower sample size some estimates are
noisy (see Appendix Table A8).
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Falsification Test Regressions with Random Health Facility Placement
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As a robustness check, I run a falsification test where I randomly assign villages to either
have a “fake health facility” or not. I create a dummy variable called Fake Public Health Facility,
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where the distribution of these pseudo health facilities is equal to the distribution of health facilities
in each district. I then re-estimate the specification in equation (2) using the Fake Public Health
Facility instead of actual public health facility placement. I then repeat this exercise 100 times and
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plot the resulting coefficients and confidence intervals in Appendix Figure A5. As expected, results
show that the resulting estimates for the outcome price and log price are only statistically
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distinguishable from zero in 3 and 2 percent of iterations, respectively. This approach is analogous
to using randomization inference; the randomization inference p-value is <0.01 with 1000
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replications.
Triple Interaction with Measures of Competition
Could encouraging more competition reduce the impact of stockouts? Likely no. In Appendix
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Table A9, I estimate in a triple interaction specification where I interact Public Health Facility,
Stockout, and their interaction with the number of outlets in the village. The results indicate that
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each additional outlet in a village only slightly decreases the impact of stockouts by $0.08; this
estimate is not statistically significantly different from zero. These results suggest that increasing
25
private-sector competition is unlikely to reduce the negative effects of stockouts for consumers.
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although this specification may lack adequate statistical power.
6.6 Children’s Use of Public Health Facilities: Results from the DHS
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To shed additional insight into how stockouts affect real customers and health inequality,
I use a similar approach to the main analysis with data from the 2016 Demographic and Health
Surveys, or DHS (UBOS 2018), a nationally representative survey with a module on malaria.
Female caregivers were asked a series of questions about health-seeking behavior for all children
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under 5. Specifically, caregivers with a child under 5 who reported a fever in the past 2 weeks were
asked about whether and where they sought treatment for the child’s fever (the primary symptom
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of malaria), as well as what type of treatment received. I do not have information on when the
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child’s fever occurred within the previous two week window. Therefore, I combine the most
proximate scheduled delivery date with the DHS interview date, assigning LikelyStockout to be “1”
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if before the delivery date, and “0” otherwise.
The DHS contains geospatial coordinates, displaced to protect confidentiality. I link those
coordinates with a publicly available dataset on health facilities in sub-Saharan Africa (Maina et
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al., 2019).10 I calculate the distance in miles from the respondent’s cluster, to the nearest Ministry
of Health facility as-the-crow flies. To mimic the primary analysis’ identification strategy, I then
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calculate whether or not the respondent is “close” to a health facility by whether or not the
household lives below the median distance in their district to the closest health facility. Note these
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data reflect a different year than the main analysis, and thus a different delivery date schedule in a
larger study area. These estimates also reflect demand for anti-malarial treatment for children; my
primary analysis is reflective of anti-malarial treatment for adults, which may differ.11 I estimate:
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10
This analysis likely contains measurement error. To protect confidentility, the DHS displaces coordinates.
First, each household’s location is their cluster (i.e., reduced to one central data point within a geographic
area). Second, that data point is displaced up to 2 km in urban areas and up to 10 km in rural areas.
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11
Children’s anti-malarial treatment demand is potentially more inelastic than adult demand. Malaria in
children is more likely to become a serious health condition, and health status may deteriorate more quickly.
Children’s dosages of tablets are often able to be obtained by taking a fraction of an adult dose, and also are
26
(2) %+,- = =# + =$ KA2/, FECBAB7G- + =% HB.,AGI72C.2?7+ + =& KA2/,FECBAB7G-
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∗ HB.,AGI72C.2?7+ + 8. + 9 * :+,- + ;+,-
Results in Table 7 show that although children are no more likely to contract a fever during
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times where the closest health facility likely has a stockout (Column 1), caregivers adjust their
treatment-seeking behavior in relation to stockouts. Caregivers were asked where they sought
treatment for their feverish child (multiple responses allowed). I find that stockouts decrease the
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likelihood of seeking treatment at public health facilities by 7 percentage points (column 2), driven
by a 5.4 percentage point reduction at treatment at government health centers which are typically
not able to proactively request deliveries (column 3). I find a 4.4 percentage point increase in the
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likelihood of seeking care at a private health facility (column 4), but this estimate is not statistically
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different from zero. I find that there is no change in the likelihood of seeking treatment (column 5),
but there is a 4.3 percentage point increase in the likelihood of not receiving any medicine for the
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fever. While not different from zero, there is a large (5.1 percentage point) decrease in the
likelihood of receiving a first-line antimalarial (p=0.134). These results are consistent with
stockouts reducing the provision of treatment in the public sector and switching treatment-seeking
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to the private sector, potentially increasing the time and financial costs to families. Among
caregivers who sought treatment at a facility, there is a 9.2 percentage point reduction in seeking
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care first at a public health facility and a nearly equivalent increase (9.4 percentage points) in the
likelihood of seeking care first at a private health facility. Thus, it is likely that customers are aware
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of stockouts, and adjust their treatment-seeking in response.

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less expensive, leading to more substitutability towards the private sector . On the other hand, very young
children cannot take tablets, and many private sector drug shops and pharmacies do not carry injections,
leaving them with no options for care without the public sector. In addition, there may be issues of correlated
health shocks within a family. Stresman et al., (2020) document that when one individual in a household has
malaria, there are between 5-20 greater odds of another household member also having malaria. Therefore,
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if households cannot afford to treat all sick members at the same time, my results are consistent with an adult
receiving treatment and not a child.
27
In Appendix Table A10, I re-estimate this specification using different sub-samples to
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examine the heterogeneity of results. The effect of stockouts is approximately an increase in 6.2-
6.7 percentage points for children in the bottom two wealth quintiles and with mothers without a
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primary education, respectively. There are no significant effects among children in richer or more
education households.
7 Discussion and Conclusion
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Stockouts are common in developing countries, but there is little empirical evidence on
how they impact consumers. In this study, I quantify the impact of public-sector stockouts on the
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private sector for anti-malarial drugs. I use plausibly exogenous variation in public sector drug
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stocks induced by a centrally-set delivery schedule, and estimate the impact on prices and demand
on vendors more exposed to the stockout. I find that during periods when stockouts were more
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likely to occur, drug prices rise by approximately $0.68 (35 percent). I find few quality
improvements. While my results are ambiguous regarding whether the total number of customers
changes during stockouts, I find evidence consistent with changes in the composition of private
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sector demand during likely stockout periods. Customers have higher levels of education and
income, and also report walking further to visit the outlet. These averages suggest that vulnerable
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populations, who may be more susceptible to malaria transmission, are also most affected by public
sector stockouts because they are least able to afford care in the private sector. Using data from the
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DHS, I show that children are more likely to not receive medicines during times of stockouts,
suggesting that the availability of anti-malarial drugs through private healthcare providers does not
completely offset the negative effects of stockouts. Moreover, these effects are concentrated on
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children in poorer and less-educated households.
The implications of this paper are three-fold. First, stockouts cause negative impacts
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beyond health outcomes. In particular, they may affect economic variables such as prices and
overall functioning of the private sector for essential medicines, decreasing consumer welfare
28
through non-health channels.
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Second, stockouts in the public sector may cause negative spillovers for customers in the
private sector. Even those customers who never frequent the public sector may be adversely
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affected by stockouts through higher prices. These higher prices in themselves undercut the policy
goals associated with large-scale subsidies, additionally wasting resources and efforts.
Third, although regulations are weak in developing countries, more attention should be
made by those agencies to find market-based strategies to improve the functioning of public sector
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facilities. The potential improvements in public sector provider operations, supply chains, and
logistics may improve quality of care for the majority of patients who first seek treatment in the
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private sector. While I am limited by statistical power, my estimates suggest that increased
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competition does not substantially mitigate the impact on prices. Instead, policy focus should center
around mechanisms that allow access to essential medicines at affordable prices, particularly for
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vulnerable groups. Improving the service delivery through the public sector may be an important
strategy for improving health care quality and equity in poor countries.
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32
Figure 1: Market Dynamics
ed
Price
iew
MC
Pstockout
ev
Ptypical
r
MRtypical RDstockout
RDtypical
Qt Qs
er MRstockout
Quantity
pe
Notes: Above is the graph of the drug vendor’s optimal choice of price and quantity during Typical times
and when there is a Stockout. During typical times, the Residual Demand curve is the dotted line, with
corresponding dotted marginal revenue curve. During stockouts, the residual demand curve (the solid line)
has a higher intercept and a steeper slope as the composition of demand changes.
ot
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33
ed
Figure 2: Fraction Complete Stockout at Public Health Facilities
iew
r ev
er
pe
Notes: Above are coefficient estimates from an event study on the fraction of health facilities reporting a
complete stockout of all ACTs using MTRAC data. MTRAC data is collected weekly from health facilities
throughout Uganda. Each coefficient represents the percentage point change in the likelihood of a facility
ot
reporting a complete stockout relative to the week of delivery. Weeks 4 before/after the scheduled delivery
are excluded. 95 percent confidence intervals are in the dashed red lines. Regressions include district and
week-of-year fixed effects. Standard errors are clustered at the district level.
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Table 1: Frequency of Reported Stockouts Relative to Scheduled Delivery Date
ed
Proportion
Proportion Fraction Facilities
Facilities in
Facilities in in District
District with
District with Reporting in
Complete
Partial Stockout MTRAC
iew
Stockout
VARIABLES (1) (2) (3)
3 weeks before delivery date 4.371*** 0.207 0.579
(0.825) (0.608) (0.655)
2 weeks before 2.850*** 0.21 0.063
(0.957) (0.582) (0.638)
ev
1 week before 1.125 -0.254 -0.405
(0.816) (0.642) (0.709)
1 week after delivery date -4.748*** -1.063 -1.152
(0.911) (0.678) (0.851)
r
2 weeks after -3.201*** -1.485** -1.400*
(0.928) (0.628) (0.747)
3 weeks after -4.484*** -0.813 -0.458
Mean of Dependent Var for Week of Delivery

Observations
er (0.739)
19.556
4,018
(0.729)
44.160
4,018
(0.770)
52.747
4,018
pe
R-squared 0.467 0.754 0.751
Notes: Sample is all districts reporting to MTRAC in the first 35 weeks of 2015. The dependent variable is
the proportion of facilities in a district with a complete (Column 1) or partial (Column 2) stockout of
ACTs. Column 3 is the proportion of facilities reporting information to MTRAC. While MTRAC is
officially mandatory, in practice only 52 percent of facilities reported in during this data period. The
ot
omitted category is the week of delivery. Regressions exclude 4 weeks before/after the delivery date
because classifying that period as before or after the nearest delivery date is ambiguous. Regressions
include week of year dummies and district fixed effects. Robust standard errors in parentheses, clustered
at the district level. *** p<0.01, ** p<0.05, * p<0.1.
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35
Table 2: Summary Statistics
ed
P-Value
No Public Conditonal
Health Public Health on Parish
All Facility Facility Difference FE
(N=128) (N=111) (N=17) ( (2) - (3) )
iew
Panel A: Market Characteristics (1) (2) (3) (4) (5)
Population (mean) 1294 1334 1059 275 0.64
Population (median) 700 672 800 -128 --
Number of private outlets 3.88 3.78 4.53 -0.75 0.44
Number of drug shops 2.21 2.07 3.12 -1.05 0.35
Number of clinics 1.43 1.47 1.18 0.29 0.58
Number of pharmacies 0.24 0.24 0.24 0.01 0.54
ev
P-Value
No Public Conditonal
Health Public Health on Parish
All Facility Facility Difference FE
(N=442) (N=370) (N=72) ( (2) - (3) )
r
Panel B: Vendor Survey Variables and Price (1) (2) (3) (4) (5)
Number of customers (per day) 21.97 22.02 21.71 0.31 0.81
Percent customers known by name 0.43 0.43 0.43 0.00 0.59
License displayed
Dispenser is qualified
Score on Malaria Literacy Questions
Number of antimalarial drugs in stock
er
0.34
0.35
0.81
5.35
0.34
0.35
0.81
5.40
0.38
0.38
0.79
5.10
-0.04
-0.03
0.02
0.30
0.40
0.03
0.45
0.53
pe
Average number of employees 2.26 2.25 2.31 -0.06 0.39
Mean monthly profits (USD) 482.62 532.73 218.31 314.42 0.39
Median monthly profits (USD) 77.13 77.13 77.13 0.00 --
Minutes walk to nearest private provider 7.02 7.11 6.57 0.54 0.89
Minutes walk to nearest public provider 39.51 44.01 16.77 27.24 0.00
Price paid by SPs in non-stockout periods 3.34 3.37 3.10 0.26 0.89
ot
Notes: Data are from the drug outlet census and the drug vendor survey in the analysis sample. Population size was
missing for 11 markets. In Column 5, the p-value from the t-test of differences controls for parish fixed effects and cluster
standard errors at the market level. All variables in Panel B are taken from the drug vendor survey, aside from "Price paid
by SPs in non-stockout periods" which is data taken from the SP purchases during periods after the scheduled delivery
tn
date to public sector health facilities in that district.

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Table 3: Effect on Market Demand and Inventories (Vendor Survey)
e d
Number of
Customers
Number of
Customers Seeking
Malaria Drugs
Total # Customers
Buying a Full Dose
Total # Customers
Buying a Full Dose
of Any Antimalarial
ie w
Total # Customers
Buying a Partial
Dose of AL in Past
Total # Customers
Buying a Partial
Dose of Any
v
(Yesterday) of AL in Past Week Antimalarial in Past
(Yesterday) in Past Week Week
Week
VARIABLES
Public Health Facility*Likely Stockout

(1)
-14.755
(10.352)
(2)
-6.028
(5.168)
r
(3)
5.684
(6.169)
(4)
9.693
(6.478)
e (5)
-0.007
(2.545)
(6)
-0.014
(2.565)
Public Health Facility
Likely Stockout
1.925
(8.509)
-18.693
(29.733)
-0.816
(3.144)
-19.643
(19.397)
er -5.238
(4.500)
-2.118
(11.915)
-5.952
(4.882)
-3.993
(11.809)
-0.801
(0.554)
-0.047
(1.337)
-0.764
(1.149)
1.581
(2.752)
Pharmacy
Clinic
43.120***
(11.589)
-1.112
(2.596)
17.423***
(6.514)
1.649*
(0.948)
p e 37.105**
(17.682)
3.199*
(1.683)
40.861*
(21.092)
3.408*
(1.784)
-0.857
(0.602)
0.141
(0.491)
-0.138
(1.882)
-0.812
(0.681)
Observations
R-squared
442
0.272
o t 442
0.205
442
0.131
442
0.123
442
0.123
442
0.124
n
Mean Dependent Variable 21.97 6.213 9.222 11.57 1.403 2.898
Notes: Sample is all vendors with a completed survey, excluding missing values. Number of Customers (Columns 1 and 2) is the reported total number of customers visiting the
t
outlet the previous day. All other columns are calculated from the Drug Inventory Module of the Vendor Survey. Public Health Facility is a dummy variable indicating that the
market contains a public health facility. Likely Stockout is a dummy variable where 1 when vendor survey was conducted prior to the next drug shipment date to public sector
ir n
health facilities in that district, a time when when the local public sector health facility is most likely to have a stockout. Drug shop or clinic is based upon the census. All
regressions include a parish fixed effect, interviewer fixed effects, and a control for week of year. Robust standard errors in parentheses, clustered at the market level. ***
p<0.01, ** p<0.05, * p<0.1
e p
Pr 37
Table 4: Effect on Vendor Inventories (Vendor Survey Data)
ed
Vendor Survey All Drugs on Vendor
Data From: Inventory
Number of Drugs Number of Drugs
Drug Unit Cost (USD)
Listed on Inventory in Stock
iew
VARIABLES (1) (2) (3)
Public Health Facility*Likely Stockout 0.502 0.492 0.181
(0.620) (0.729) (0.534)
Public Health Facility -0.499 -0.526 -0.335
(0.458) (0.645) (0.372)
Likely Stockout 0.292 -0.037 -0.416
(0.826) (0.715) (0.479)
ev
Pharmacy 6.251*** 6.817*** 1.140**
(0.668) (0.755) (0.544)
Clinic 0.617** 0.522 0.171
(0.289) (0.359) (0.124)
r
Observations 442 442 1,216
R-squared 0.452 0.445 0.305
Mean of Dependent Variable
er
4.928 5.348 1.712
Notes: Sample in Columns 1 and 2 is all attempts at purchasing drugs during standardized patient visits (defined as
where the SP interacted with a vendor). Sample in Column 3 is all drug cost prices per unit listed on the drug
inventory section of the survey. Costs are in 2013 UGX. Sample in Columns 4 and 5 is all vendors with a
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completed survey. Number of drugs listed on the inventory and in stock is information taken from the drug vendor
survey and uses one observation per vendor. Sample size differs slightly due to missing values. Public Health
Facility is a dummy variable indicating that the village contains a public health facility. Likely Stockout is a dummy
variable where 1 when vendor survey was conducted prior to the next drug shipment date to public sector health
facilities in that district, a time when when the local public sector health facility is most likely to have a stockout.
Drug shop or clinic is based upon the census. All regressions include a parish fixed effect,
ot
interviewer/standardized patient fixed effects, and a control for week of year. Robust standard errors in
parentheses, clustered at the market level. *** p<0.01, ** p<0.05, * p<0.1
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38
Table 5: Effects of Public Sector Competition on Price and Quality Measures (SP Data)
e d
VARIABLES
Price Paid
(1)
Ln (Price Paid)
(2)
Expired Drug
(3)
Diverted Drug
(4)
ie w
Adv. Malaria
Test
(5)
Adv.
Antibiotics
(6)
Public Health Facility*Likely Stockout 0.675***
(0.179)
0.291***
(0.071)
0.066
(0.090)
e v
-0.199**
(0.100)
-0.012
(0.091)
0.098**
(0.048)
r
Public Health Facility 0.008 0.014 -0.050* 0.046 0.086 -0.045
(0.139) (0.049) (0.029) (0.049) (0.070) (0.039)
Likely Stockout
Pharmacy
-0.195
(0.183)
-0.302
-0.087
(0.061)
-0.066
er 0.075
(0.068)
-0.052
-0.007
(0.016)
-0.008
0.059
(0.073)
0.02
-0.008
(0.038)
-0.076***
Clinic
(0.198)
0.372***
(0.128)
(0.059)
0.074*
p
(0.042)e (0.034)
-0.01
(0.022)
(0.020)
0.005
(0.022)
(0.074)
0.262***
(0.046)
(0.024)
-0.009
(0.020)
Observations
R-squared
933
0.371
o t 933
0.432
933
0.179
933
0.404
933
0.247
933
0.271
n
Mean of Dependent Variable 2.99 0.992 0.103 0.089 0.343 0.064
Notes: Sample is all purchases by standardized patients (SP). All prices are in USD. The exchange rate is $1=2593 UGX. Adv. Malaria test
t
is whether the dispenser recommended the SP take a malaria test. Adv. Antibiotics is whether the dispenser advised that the SP also purchase
ir n
antibiotics during their visit. Diverted Drug indicates that the drug had markings on it indicating that it originated in the public sector. Public
Health Facility is a dummy variable indicating that the village contains a public health facility. Likely Stockout is a dummy variable where 1
when the standardized patient visit was conducted prior to the next drug shipment date to public sector health facilities in that district, a time
p
when when the local public sector health facility is most likely to have a stockout. Drug shop or clinic is based upon the census. All columns
include controls for random assignment, visit order, week of year, standardized patient fixed effects, and parish fixed effects. Robust standard
e
errors in parentheses, clustered at the market level.*** p<0.01, ** p<0.05, * p<0.1
r
P This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=3944798
39
ed
Table 6: Stockout Effects on Real Customers
Distance Bought Product Price, Years of
Income, USD
VARIABLES Walked (Min) Antimalarial USD Education
Panel A: All Real Customers (1) (2) (3) (4) (5)
iew
Public Health Facility*Likely Stockout 9.429* -0.12 -0.043 1.920* -6.297
(4.932) (0.105) (0.330) (1.066) (83.053)
Likely Stockout 6.293 0.161 0.134 -0.917 -21.502
(5.860) (0.139) (0.526) (1.027) (33.197)
Public Health Facility in Village 2.586 -0.099 0.107 -1.224* 68.552
(2.741) (0.087) (0.403) (0.644) (101.114)
Observations 753 753 753 753 753
ev
R-squared 0.125 0.092 0.192 0.133 0.194
Mean of Dependent Variable 25.9 0.448 1.618 8.835 133.9
Distance Product Price, Years of

Bought for Adult Income, USD
Walked (Min) USD Education
Panel B: Antimalarial Drug Customers Only (1) (2) (3) (4) (5)
r
Public Health Facility*Likely Stockout 8.189 0.308** 0.463 4.517*** 155.689***
(5.955) (0.117) (0.387) (1.647) (56.376)
Likely Stockout -2.887 -0.16 0.485 -0.568 -164.739
Public Health Facility in Village

(10.700)
2.796
(5.195)
er(0.100)
-0.411***
(0.127)
(0.633)
-0.397
(0.470)
(1.492)
-2.221**
(1.080)
(99.763)
-108.676***
(37.252)
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Observations 334 334 334 334 334
R-squared 0.173 0.173 0.359 0.179 0.268
Mean of Dependent Variable 28.12 0.88 2.562 9.422 155.5
Notes: The sample includes all respondents (real customers) with non-missing values for all variables. Panel A uses the sample of
all customers, Panel B uses the sample of all customers who purchased antimalarial drugs. Distance was commonly reported as
"Don't live within walking distance"; those values, and extreme values are top-coded at 60 minutes. Distance walking is measured in
minutes, and income/prices are measured in US dollars. Income is reported income from all sources over the past month. ublic
ot
Health Facility is a dummy variable indicating that the village contains a public health facility. Likely Stockout is a dummy variable
where 1 when the real customer interview was conducted prior to the next drug shipment date to public sector health facilities in that
district, a time when when the local public sector is most likely to have a stockout. All regressions control for a parish fixed effect.
Robust standard errors in parentheses, clustered at the market level. *** p<0.01, ** p<0.05, * p<0.1
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40
e d
ie w
e v
r r
ee
t p
n o
ir n t
e p
Pr 41

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The Impact of Public Health Sector Stockouts on Private Sector Prices and Access to

By: Anne Fitzpatrick1

JEL: O17; O12; I14; I11

Declarations of interest: none

medicines, stockouts may also impact economic outcomes.

difference-in-difference strategy. I combine information on the timing of deliveries to public

although there is an increase in the likelihood of advising an antibiotic, which is an unnecessary

risk of malarial complications.

distinguished from zero due to low statistical power.

while maintaining access for vulnerable groups.

concludes with a discussion of the policy implications of this paper.

ACTs (artemisinin-based combination therapy) as a first-line treatment for uncomplicated malaria.

sulphadoxine-pyrimethamine (“fansidar”), are cheap and available, although no longer effective

due to parasitic drug resistance.

2.2 The Public Healthcare System in Uganda

are common. Additional supply shipments generally do not occur.

antimalarial drugs (Fitzpatrick, 2021).

2.3 The Private Healthcare System

owner, and 76 percent have 1-2 employees.

treatment-seeking is common, allowing me to have a sufficient number of people and purchases to

Ugandans spend approximately 10 percent of their annual consumption on health, half of

In conjunction with lack of available treatment among at-risk populations, there is

simultaneously a problem of over-treatment. Similar to other developing countries, private sector

In contrast to predictions on price and quantity, the theoretical effect of competition on

decrease consumer well-being. The tendency of profit-maximizing providers to increase prices or

then reputation incentives may be diminished.

4.1 Private Sector Data

during my time period, occurring in less than 5 percent of shopping attempts.

measuring prices paid by consumers, as opposed to vendor or real customer reports.

4.2 Public sector deliveries and stocks

4.3 Linking delivery dates and stockouts

+ ') )ℎ+,, -,,./ 617,+ + 8" + 9 * :!" + ;"

receive stocks prior to the scheduled delivery date.

Therefore, I address time-varying trends by employing a difference-in-difference estimation

Specifically, I leverage differential exposure to plausibly exogenous demand shocks

(2) %+,- = =# + =$ >?@ABC D,EA7ℎ FECBAB7G- + =% HB.,AGI72C.2?7+

+ =& >?@ABC D,EA7ℎFECBAB7G- ∗ HB.,AGI72C.2?7+ + 8. + 9 * :+,- + ;+,-

conservative approach to inference. As a robustness check against a potential issue of small

assumption, b3 identifies the causal effect of stockouts on market outcomes.

likelihood of being in the sample of parishes (not shown).

that appear comparable on observable characteristics.8 In addition, it is comforting to note that

stockouts, the true difference is larger than what I present in my analysis.

are indeed not affected by stockouts.

with private sector drug prices or other outcomes.

6.1 Measures of Demand and Private Sector Inventories

are small and close to zero (Columns 5 and 6).

observed in purchases by customers would directly lead to higher vendor profits.

6.2 Prices Paid by Consumers

6.3 Provider Behavior and Quality/Drug Attribute Measures

6.4 Real Customers

not live within walking distance to be 60 minutes.

with some noise.

health inequality, and with predicted changes in consumer demand.

noisy (see Appendix Table A8).

Triple Interaction with Measures of Competition

of stockouts, and adjust their treatment-seeking in response.

7 Discussion and Conclusion

children in poorer and less-educated households.

Economics, 11(1), 33-56. er

India. Journal of Development Economics, 83(1):1–36.

countries." Journal of Economic Perspectives 22.2 (2008): 93-114.

Calverton, United States: ICF Macro

Uganda case study.BMC Health Services Research8.1 (2008): 102.