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Does price reveal poor-quality drugs? Evidence from 17 countries

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  • Bate, Roger
  • Jin, Ginger Zhe
  • Mathur, Aparna

Abstract

Focusing on 8 drug types on the WHO-approved medicine list, we constructed an original dataset of 899 drug samples from 17 low- and median-income countries and tested them for visual appearance, disintegration, and analyzed their ingredients by chromatography and spectrometry. Fifteen percent of the samples fail at least one test and can be considered substandard. After controlling for local factors, we find that failing drugs are priced 13.6–18.7% lower than non-failing drugs but the signaling effect of price is far from complete, especially for non-innovator brands. The look of the pharmacy, as assessed by our covert shoppers, is weakly correlated with the results of quality tests. These findings suggest that consumers are likely to suspect low quality from market price, non-innovator brand and the look of the pharmacy, but none of these signals can perfectly identify substandard and counterfeit drugs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 30 (2011)
Issue (Month): 6 ()
Pages: 1150-1163

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Handle: RePEc:eee:jhecon:v:30:y:2011:i:6:p:1150-1163

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Web page: http://www.elsevier.com/locate/inca/505560

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Keywords: Counterfeit; Medicines; Price; Signal; Original data;

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References

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  1. Danzon, Patricia M & Chao, Li-Wei, 2000. "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 311-57, October.
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Cited by:
  1. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2012. "Counterfeit or Substandard? Assessing Price and Non-Price Signals of Drug Quality," NBER Working Papers 18073, National Bureau of Economic Research, Inc.
  2. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2012. "In Whom We Trust: The Role of Certification Agencies in Online Drug Markets," NBER Working Papers 17955, National Bureau of Economic Research, Inc.

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