Counterfeit or Substandard? Assessing Price and Non-Price Signals of Drug Quality

37 Pages Posted: 12 May 2012 Last revised: 25 Oct 2015

See all articles by Roger Bate

Roger Bate

American Enterprise Institute (AEI)

Ginger Zhe Jin

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Aparna Mathur

American Enterprise Institute (AEI)

Date Written: May 2012

Abstract

Pharmaceutical products can be of poor quality either because they contain zero correct active ingredient (referred to as "counterfeit") or because they contain a non-zero but incorrect amount of the right active ingredient (referred to as "substandard"). While both types of poor-quality drugs can be dangerous, they differ in health consequence, price, and potential policy remedies. Assessing basic quality of 1437 samples of Ciprofloxacin from 18 low-to-middle-income countries, we aim to understand how price and non-price signals can help distinguish counterfeits, substandard drugs, and passing drugs. Following the Global Pharma Health Fund e.V. MinilabĀ® protocol, we find 9.88% of samples have less than 80% of the correct active ingredient and 41.5% of these failures are counterfeits. Both product registration and chain affiliation of retailers are strong indicators of higher probability to pass in the Minilab test and higher retail price. Within quality failures, chain affiliation is more likely to indicate substandard while product registration with local government is more likely to indicate counterfeit. This suggests that registered products are more likely to be targeted by counterfeiters. Furthermore, substandard drugs are priced much lower than comparable generics in the same city but counterfeits offer almost no discount from the targeted genuine version. These findings are consistent with economic theory, and have important implications for both consumers and policy makers.

Suggested Citation

Bate, Roger and Jin, Ginger Zhe and Mathur, Aparna, Counterfeit or Substandard? Assessing Price and Non-Price Signals of Drug Quality (May 2012). NBER Working Paper No. w18073, Available at SSRN: https://ssrn.com/abstract=2056701

Roger Bate (Contact Author)

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States

Ginger Zhe Jin

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3484 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Aparna Mathur

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
202-868-6026 (Phone)

HOME PAGE: http://www.aei.org/scholar/aparna-mathur/

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