Science, Pathogenic Outbreak & Market Structure: Evidence from the 2010 NDM-1 Superbug Discovery & Indian Antibiotics Market
52 Pages Posted: 3 Sep 2020
Date Written: July 25, 2020
It is well documented that as market structure changes, science and technology often tend to respond to those changes. However, is there a causal relationship in the opposite direction, where scientific discovery impacts market structure? We answer this question using the natural experiment of the NDM-1 (New Delhi Metallo-Beta-Lactamase 1) superbug discovery in India, which was reported in August 2010 in Lancet Infectious Diseases. This article demonstrated that the NDM-1 superbug was resistant to the broad spectrum antibiotics, carbapenems, widely recognized as weapons of last resort against infectious bacterial diseases. Using a difference in differences strategy, we find that multinational firms selling antibiotics in India reduced their market shares in sales of carbapenems (our treatment group) compared to narrow-spectrum antibiotics (our control group) immediately after the NDM-1 2010 discovery. We also document a concurrent decline in multinational carbapenem prescriptions by physicians and in channel incentives for drug retailers. In addition, we are able to tease out the role of scientific engagement in driving variation in multinational responses. Our results are robust to pre-trends, alternative controls and while accounting for regional heterogeneity. They are also consistent with synthetic controls. These findings have implications for the information socialization role of science, its impact on resolving managerial uncertainty and in correcting market failures in healthcare for policy makers.
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