Poor Quality Drugs and Global Trade: A Pilot Study. Roger Bate Ginger Zhe Jin Aparna Mathur Amir Attaran

Transcription

1 Poor Quality Drugs and Global Trade: A Pilot Study Roger Bate Ginger Zhe Jin Aparna Mathur Amir Attaran

2 RX drugs in the global market Generics and brand-name drugs Brand-name drugs are very expensive and only affordable by a small share of population Generics are more common for the mass population Global trade India: the third largest manufacturing country of medicine 22% of international trade in generics (Sharma et al. 2008, KPMG 2006) In , 19 of 21 large Indian manufacturers had at least 50% of sales devoted to exports (MCFDP 2012) A large price advantage (Cameron et al. 2008, Heath Action International) Africa: import 70% of its drugs, 80% of its antiretroviral medicines (USAIDS 2013)

3 Regulatory Environment Regulation in consumption countries Local product registration Price regulation Criminal penalty for drug counterfeiting Intellectual property rights protection Qualifications that target exporting manufacturers SRA approval (US, western Europe, etc) WHO prequalification WTO Trade-related Intellectual Property Rights (TRIPS) Arora et al. (2008); Kyle and Qian (2013); Duggan and Goyal (2012); Chaudhuri, Goldberg and Jia (2006) Major policy concerns: IP, access, quality, affordability

4 Drug quality Institute of Medicine (2013) Drug quality is not well measured in the global market Poor quality medicines were found in 124 countries in 2011 Drug quality is found to be lower in developing countries than in developed countries Anti-infectives are one of the drug categories most affected by poor drug quality Falsified and substandard drugs Bate, Jin, and Mathur (2011 JHE, 2014 JEMS forthcoming) Roughly 10% failure in quality test of drug samples from 18 countries Price is a noisy signal of quality Product registration predicts good quality on average but it attracts falsification Ranbaxy scandal On May 13, 2013 Ranbaxy were found guilty on seven federal charges regarding selling adulterated generic drugs, fabricating data, and committing fraud. Fortune May 15, 2013: Whistleblower Dinesh Thakur said that the company culture was for management to dictate the results it wanted and for those beneath to bend the process to achieve it. Thakur also described how Ranbaxy took its greatest liberties in markets where regulation was weakest and the risk of discovery was lowest.

5 This paper Acquire 1470 made-in-india drug samples from 18 midto-low income countries ciprofloxacin, erythromycin, isoniazid, rifampicin 17 unique Indian manufacturers according to the label Have their active ingredient tested in a UK lab according to the minilab test tool (TLC test) pass, substandard (<80%), falsified (0%) Examine whether the same type of drugs from the same India manufacturer differ in quality according to the purchase place India domestic, Africa, Non-africa Search for the most likely economic explanation for the data patterns

6 Sample summary Full sample India Domestic Africa Non-Africa Total N pass 91.00% 83.70% 95.20% 89.10% falsified 3.30% 4.90% 4.80% 3.90% substandard 5.60% 11.40% 0.00% 7.00% price Non-registered N pass 67.80% 49.40% % 62.40% falsified 9.60% 6.00% 0.00% 7.60% substandard 22.60% 44.60% 0.00% 30.00% price Registered N pass 94.20% 91.90% 94.40% 93.60% falsified 2.50% 4.60% 5.60% 3.30% substandard 3.30% 3.50% 0.00% 3.20% price

7 Results (linear probability model) Sample Full Registered only Non-registered only Dependent Variable Pass Pass Pass Pass Pass Pass (1) (2) (3) (4) (5) (6) Africa *** *** *** *** Non-africa *** *** 0.272*** Erythromycin *** ** *** Isoniazid ** Rifampicin ** *** Constant 0.926*** 0.915*** 0.943*** 0.943*** 0.807*** 0.682*** Manufacturer-drug FE No Yes No Yes No Yes Observations 1,470 1,470 1,260 1, R-squared ***p<0.01, **p<0.05, *p<0.1. Errors are clustered by drug-country.

8 Why worse quality in Africa? Dependent Variable pass pass pass pass pass Africa *** ** *** Non-Africa * * ** Max Legal Penalty Rule of Law Overall Index IPRI Overall Index City GDP per capita 5.56e-06** 1.09e-05*** Adult Literacy Rate ** Have any price regulation * ** Manufacturer-drug FE Yes Yes Yes Yes Yes Observations 1,470 1,470 1,470 1,470 1,470 R-squared ***p<0.01, **p<0.05, *p<0.1. Linear probability model. Errors are clustered by drug-country.

9 Potential explanations The labeled India manufacturers are real and they differentiate product quality according to destination. Because registration is costly, registered manufacturers face greater reputation harm if they cut corners in quality Counterfeiters pretend to be Indian manufacturers in Africa and produce poor quality drugs. Counterfeiters should be more likely to falsify than to produce substandard drugs if penalty for counterfeiting does not depend on ingredients Counterfeiters should be more likely to counterfeit registered products if higher market price exceeds the higher risk of being caught Drug quality deteriorated more in Africa due to poor storage and distribution Unlikely because SRA-approved drugs did not have worse quality in Africa (Bate, Jin, Mathur 2014), and poor-quality were found in Indian-made drugs but not European-made drugs (USP 2013)

10 Results by registration status Sample Full Full Full Non-falsified Dependent Variable pass? falsified? substandard? pass? Africa * * * Non-Africa 0.330*** *** *** 0.257*** Product registered 0.290*** *** ** 0.249*** In purchase country Africa * product-registered in purchase country Non-Africa * product-registered *** 0.136*** 0.214** *** in purchase country Manufacturer-drug FE Yes Yes Yes Yes Observations 1,470 1,470 1,470 1,413 R-squared ***p<0.01, **p<0.05, *p<0.1. Errors are clustered by drug-country.

11 Summary of findings Main findings: Quality of made-in-india drugs is worse in Africa than in India domestic and Non-african cities Mostly driven by unregistered substandard drugs One likely explanation is that Indian manufacturers and/or their distributors differentiate quality by final destination Caveats: Our convenience sample focuses on four drug types from retail pharmacies with store front in cities Our test is a basic API test, we cannot say about impurity and other quality problems Our interpretation is an intelligent guess based on economic assumptions

12 Policy Implications Coordination: African countries harmonize and improve their drug regulations Collective security: International community presses Indian government to better regulate exports Information disclosure: Enhance Consumer and doctor awareness of poor-quality drugs India is not the only large exporters of medicines. Further studies are needed on other exporting countries.

13 Thank you! Comments are welcome.