Working Paper: NBER ID: w18073
Authors: Roger Bate; Ginger Zhe Jin; Aparna Mathur
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. \n\nFollowing 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 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.
Keywords: Drug Quality; Counterfeit Drugs; Substandard Drugs; Pharmaceutical Regulation
JEL Codes: D8; I15; I18; L15; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| product registration (L81) | drug quality (passing rate) (L15) |
| chain affiliation (L14) | drug quality (passing rate) (L15) |
| substandard drugs (L65) | retail price (D49) |
| counterfeit drugs (K42) | retail price (D49) |
| product registration (L81) | counterfeit drugs (K42) |
| chain affiliation (L14) | substandard drugs (L65) |