Does Price Reveal Poor-Quality Drugs? Evidence from 17 Countries
AbstractFocusing 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. Indeed, many cheaper non-innovator products pass all quality tests, and are genuine generic drugs.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16854.
Date of creation: Mar 2011
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Publication status: Published in the Journal of Health Economics 30 (2011) 1150-1163
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- Bate, Roger & Jin, Ginger Zhe & Mathur, Aparna, 2011. "Does price reveal poor-quality drugs? Evidence from 17 countries," Journal of Health Economics, Elsevier, vol. 30(6), pages 1150-1163.
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- D4 - Microeconomics - - Market Structure and Pricing
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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