Equilibrium effects of pharmaceutical bundling: evidence from India

Equilibrium effects of pharmaceutical bundling: evidence from India

Collection:
Health Policy and Services Research
Series Title(s):
Working paper (Stanford Institute for Economic Policy Research)
Author(s):
Cao, Shengmao, author
Chatterjee, Chirantan, author
Contributor(s):
Stanford Institute for Economic Policy Research, issuing body.
Publication:
[Stanford, CA] : Stanford Institute for Economic Policy Research (SIEPR), January 6, 2022
Language(s):
English
Format:
Text
Subject(s):
Drug Combinations
Drug Costs
Economic Competition
Economics, Pharmaceutical
India
United States
Genre(s):
Technical Report
Abstract:
We study the equilibrium effects of competitive bundling on market outcomes and social welfare in the context of the Indian pharmaceutical industry. Fixed-dose combinations (FDCs), which bundle two or more drugs in a single pill, account for over 50% of pharmaceutical revenue in India. Using an equilibrium model of drug demand and supply, we show that the price and welfare effects of FDCs are theoretically ambiguous. Empirically, we find that FDCs on average sell at a 28% discount but increase standalone component prices by 3%. New FDCs significantly increase sales of drug bundles. To quantify the welfare effects of FDCs, we estimate the model in the market for Alzheimer’s drugs. We find that FDCs increase consumer surplus by 21% and firm profits by 13% because of significant market expansion and cost savings. Counterfactual analysis shows that applying FDC regulations from the US to India could deter FDC entry and forestall potential welfare benefits.
Copyright:
Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY-NC-ND license. (More information)
Extent:
1 online resource (1 PDF file (various pagings))
Illustrations:
Illustrations
NLM Unique ID:
9918383988406676 (See catalog record)
Permanent Link:
http://resource.nlm.nih.gov/9918383988406676