Sourcing under Sanctions¶
Judicial Urgency and Pharmaceutical Procurement Costs
Insper Institute of Education and Research, Sao Paulo, Brazil
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JPubE short paper — v10, May 2026.
[15.9%, 21.1%] Selection-bounded Lee interval on the litigated-over-administrative price gap. In deep repeated urgent markets the cost surfaces as fragmented sourcing, not a broad same-firm markup.
Abstract¶
Court mandates secure access to medicines, but they can also change how governments buy. We study São Paulo pharmaceutical procurement on BEC, covering 479,330 purchase-offer-item observations from 2009--2019. Higher prices under legal urgency can reflect two very different margins: incumbent suppliers charging more to sanctioned buyers, or fragmented sourcing that changes scale and supplier matching. Because court orders originate outside procurement offices, we interpret ordinary-versus-urgent estimates as the procurement effect of externally imposed legal urgency, conditional on item, time, and purchasing-unit fixed effects. A selected administrative urgent channel provides the closest feasible comparison without court sanctions; Lee bounds place the litigated-over-administrative price gap between 15.9% and 21.1%. The cost margin is not mainly a broad same-firm markup in deep repeated urgent markets: within the same firm, buyer, and item, prices are statistically indistinguishable across urgent regimes. Instead, judicial urgency operates through sourcing. Administrative orders are 3.3 times larger, and modal winners differ in 70.2% of item-buyer pairs. A residual within-firm price gap persists in thinner or earlier markets. The policy margin is not weaker access, but procurement capacity that preserves aggregation and supplier matching under legal urgency.
JEL Classification: D44 D73 H51 H57 I18 K41
Keywords: public procurement health litigation accountability sourcing
Key Findings¶
No broad same-firm markup in deep repeated urgent markets
Within firm-buyer-item triples observed under both urgent regimes (1,206 triples, 4,573 observations), the administrative coefficient is β̂ = 0.035 (SE 0.041) — statistically indistinguishable from zero. Conditional on the same firm, buyer, and item, prices are indistinguishable across urgent regimes in deep markets. This is a deep-market null, not a universal claim: a residual within-firm gap persists in the earlier period, while the quantity dimension reflects scale rather than same-firm pricing.
The under-the-gun gap is selection-bounded, not large
After Lee trimming for selection into the administrative channel, the litigated-over-administrative gap lies in [15.9%, 21.1%] — at the lower end of within-buyer procurement-cost dispersion documented in comparable settings (Best et al., 2023; Bosio et al., 2022). The bounded interval, not the naïve cross-sectional gap, is the disciplined object.
The cost surfaces as sourcing, not broad pricing
Among item-buyer pairs observed under both urgent regimes, the modal winning firm differs across regimes in 70.2% of pairs. Conditional on the same firm, prices are statistically indistinguishable in deep markets; unconditionally, the winning supplier often changes — the empirical signature of fragmented sourcing.
Lost scale does the heavy lifting
Administrative orders are roughly 3.3× larger than litigated orders, so fragmented court-mandated buying gives up scale. Legal urgency makes the routines that aggregate demand harder to use.
Fiscal procurement-cost implication
Applied to $300M of annual litigated spending in São Paulo, the bounded gap implies a fiscal procurement-cost implication of $27.8M per year (Lee range \(23.9M–\)31.7M). This is a fiscal procurement-cost calculation, not a full welfare estimate. The policy response is to preserve delivery while rebuilding aggregation and supplier matching under legal urgency.