Falsified or Substandard? Assessing Price and Non‐Price Signals of Drug Quality

25 Pages Posted: 27 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: Winter 2015

Abstract

Pharmaceutical products can be of poor quality either because they contain zero correct active ingredient (referred to as “falsified”) or because they contain a nonzero but incorrect amount of the right active ingredient (referred to as “substandard”). Although 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 nonprice signals can help distinguish between falsified, substandard, and passing drugs. Following the Global Pharma Health Fund e.V. Minilab® protocol, we find 9.88% of samples have less than 80% of the correct active ingredient and 41.5% of these failures are falsified. Falsified and substandard drugs tend to differ in two observable attributes: first, falsified drugs are more likely to mimic drugs registered with local drug safety regulators. Second, after controlling for other factors, substandard drugs are on average cheaper than passing generics in the same city but the price of falsified drugs is not significantly different from that of passing drugs on average. These data patterns suggest that careful consumers may have information to suspect a drug is substandard before purchase but substandard drugs can still exist to cater to poor and less‐educated population. In contrast, falsified drugs will be more difficult for consumers to identify ex ante because they appear similar to high‐quality, locally registered products in both price and packaging.

Suggested Citation

Bate, Roger and Jin, Ginger Zhe and Mathur, Aparna, Falsified or Substandard? Assessing Price and Non‐Price Signals of Drug Quality (Winter 2015). Journal of Economics & Management Strategy, Vol. 24, Issue 4, pp. 687-711, 2015, Available at SSRN: https://ssrn.com/abstract=2680404 or http://dx.doi.org/10.1111/jems.12114

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/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
203
PlumX Metrics