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Does Price Reveal Poor-Quality Drugs? Evidence from 17 Countries
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Does Price Reveal Poor-Quality Drugs? Evidence from 17 Countries

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  • Roger Bate
  • Ginger Zhe Jin
  • Aparna Mathur

Abstract

Focusing on 8 drug types on the WHO-approved medicine list, we constructed an original dataset of 899 drug samples from 17 low- and median-income countries and tested them for visual appearance, disintegration, and analyzed their ingredients by chromatography and spectrometry. Fifteen percent of the samples fail at least one test and can be considered substandard. After controlling for local factors, we find that failing drugs are priced 13.6-18.7% lower than non-failing drugs but the signaling effect of price is far from complete, especially for non-innovator brands. The look of the pharmacy, as assessed by our covert shoppers, is weakly correlated with the results of quality tests. These findings suggest that consumers are likely to suspect low quality from market price, non-innovator brand and the look of the pharmacy, but none of these signals can perfectly identify substandard and counterfeit drugs. Indeed, many cheaper non-innovator products pass all quality tests, and are genuine generic drugs.

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  • Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2011. "Does Price Reveal Poor-Quality Drugs? Evidence from 17 Countries," NBER Working Papers 16854, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16854
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    2. Ma, Xingliang & Spielman, David J. & Nazli, Hina & Zambrano, Patricia & Zaidi, Fatima & Kouser, Shahzad, 2014. "Information efficiency in a lemons market: Evidence from Bt cotton seed market in Pakistan," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 175278, Agricultural and Applied Economics Association.
    3. Svensson, Jakob & Björkman Nyqvist, Martina & Yanagizawa-Drott, David, 2012. "Can Good Products Drive Out Bad? Evidence from Local Markets for (Fake?) Antimalarial Medicine in Uganda," CEPR Discussion Papers 9114, C.E.P.R. Discussion Papers.
    4. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2012. "In Whom We Trust: The Role of Certification Agencies in Online Drug Markets," NBER Working Papers 17955, National Bureau of Economic Research, Inc.
    5. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2015. "Falsified or Substandard? Assessing Price and Non‐price Signals of Drug Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(4), pages 687-711, October.
    6. Adrienne M. Lucas & Nicholas L. Wilson, 2018. "Can At-Scale Drug Provision Improve the Health of the Targeted in Sub-Saharan Africa?," American Journal of Health Economics, MIT Press, vol. 4(3), pages 358-382, Summer.
    7. Esther Atukunda & Anne Fitzpatrick, 2015. "An Evaluation of Factors Affecting Drug Quality: Evidence from the Antimalarial Market in Uganda," Working Papers 2015_03, University of Massachusetts Boston, Economics Department.
    8. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2012. "Counterfeit or Substandard? Assessing Price and Non-Price Signals of Drug Quality," NBER Working Papers 18073, National Bureau of Economic Research, Inc.
    9. Levaggi, Rosella & Marcantoni, Claudio & Filippucci, Laura & Gelatti, Umberto, 2012. "Not a good buy: Value for money of prescription drugs sold on the Internet," Health Policy, Elsevier, vol. 106(3), pages 241-245.
    10. Barenji, Reza Vatankhah & Hariry, Reza Ebrahimi & Demirkol, Denizhan & Daim, Tugrul U., 2024. "Research landscape analysis for quality in Pharma 4.0 era," Technology in Society, Elsevier, vol. 76(C).
    11. Chatterjee, Chirantan & Mohapatra, Debi Prasad & Estay, Manuel, 2019. "From courts to markets: New evidence on enforcement of pharmaceutical bans in India," Social Science & Medicine, Elsevier, vol. 237(C), pages 1-1.
    12. Bate Roger & Jin Ginger Zhe & Mathur Aparna, 2013. "In Whom We Trust: The Role of Certification Agencies in Online Drug Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(1), pages 111-150, December.
    13. Nicholas Wilson, 2015. "Can Disease-Specific Funding Harm Health? in the Shadow of HIV/AIDS Service Expansion," Demography, Springer;Population Association of America (PAA), vol. 52(5), pages 1671-1700, October.
    14. Roger Bate & Ginger Zhe Jin & Aparna Mathur & Amir Attaran, 2014. "Poor Quality Drugs and Global Trade: A Pilot Study," NBER Working Papers 20469, National Bureau of Economic Research, Inc.
    15. Lin, Yu-Shiuan & Lin, Min-Ting & Cheng, Shou-Hsia, 2019. "Drug price, dosage and safety: Real-world evidence of oral hypoglycemic agents," Health Policy, Elsevier, vol. 123(12), pages 1221-1229.
    16. Daniel Bennett & Wesley Yin, 2014. "The Market for High-Quality Medicine," NBER Working Papers 20091, National Bureau of Economic Research, Inc.
    17. Nunes, Alexandre Morais & Ferreira, Diogo Cunha & de Matos, Andreia & Julião, Rui Miranda, 2020. "The Portuguese generic medicines market: What’s next?," Health Policy, Elsevier, vol. 124(4), pages 397-403.
    18. Rafael Alfonso-Cristancho & Tatiana Andia & Tatiana Barbosa & Jonathan Watanabe, 2015. "Definition and Classification of Generic Drugs Across the World," Applied Health Economics and Health Policy, Springer, vol. 13(1), pages 5-11, August.
    19. Fitzpatrick, Anne, 2023. "Which price is right? A comparison of three standard approaches to measuring prices," Journal of Development Economics, Elsevier, vol. 163(C).
    20. Dai, Rong & Watal, Jayashree, 2021. "Product patents and access to innovative medicines," Social Science & Medicine, Elsevier, vol. 291(C).

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    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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