This study examines the effect of chain entry on drug quality, price, and incumbent pharmacy performance in Hyderabad, India. With a unique data set and a natural experiment methodology, we show that chain entry leads to a relative 5 percent improvement in quality and a 2 percent decrease in price. The chain appears to increase retail competition by offering higher-quality drugs and lower prices. Despite the concern that asymmetric information may undermine drug quality, we show that consumers correctly perceive these quality changes. Our findings suggest that capital-intensive firms such as chains play an important role translating market expansion into higher quality. (Coauthor Wesley Yin, Boston University).