PremiumThe study nails the trend in the retail drugs market—although low-priced generic copies of drugs are available for most originator drugs, asymmetric information about the generic quality and penchant for branded medicines undermine price competition.
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The perceived difference in the quality of various brands of generic drugs that can be prescribed interchangeably is one of the major barriers to effective price competition in the pharmaceuticals market, the Competition Commission of India (CCI) has found in a market study.
The study nails the trend in the retail drugs market—although low-priced generic copies of drugs are available for most originator drugs, asymmetric information about the generic quality and penchant for branded medicines undermine price competition.
Unlike in Western markets, where patented drugs are branded, and off-patent ones are mostly generic drugs sold by their chemical names, Indian drugmakers give brand names to generic copies, known as branded generics, to get a market edge. The formulations sold by chemical name are referred to in India as ‘generic generics’ or ‘trade generics,’ which account for only 10% of the generics segment and are mostly part of public procurement. The CCI study has found a wide price variation among generic brands of the same formulations by different producers and even among two brands of the same formulation sold by the same producer.
CCI’s market studies highlight trends and anti-competitive practices, which help in its advocacy work. It can also be the basis for policy or regulatory initiatives.
In the study, CCI found that the top-selling antibiotic formulation amoxicillin and clavulanic acid 125mg and 500mg tablets are currently sold by 217 companies under 292 brands, with prices ranging from ₹40 to ₹336 for a pack of six tablets. Notable variation in price is also found between two brands of the same medicine sold by the same company in some instances. For example, prices charged by one company for two brands of anti-diabetic combination drug glimepiride and metformin were ₹10 and ₹60 per pack of 10, CCI said.
Even in the presence of many firms and brands, market leaders charge relatively higher prices than other market participants, especially those with lower market shares. For example, human premix insulin, an anti-diabetic medicine, is sold by the market laggard at ₹15.42 per cartridge against the market leader’s price of ₹96.67 per cartridge, resulting in a price difference of 145%, the competition watchdog said in the study.
“Evidence suggests the price charged by the market leader, measured by sales value, remains highest or among the highest, whereas prices of lowest selling drug remain the least, or among the least," it noted.
The study received mixed responses about whether there are differences in quality and efficacy of different brands of the same formulation.
Some respondents said as consumers were not able to make an informed choice and the quality and efficacy of drugs are intrinsically unobservable, they follow doctors’ brand prescriptions, which are often allegedly influenced by aggressive brand promotion by pharmaceutical companies. This, according to them, reduces price elasticity of demand, deters price competition, and allows setting high prices and extraction of consumer surplus. Other respondents cited the doctor’s clinical experience about a brand’s therapeutic benefit as a factor influencing the prescription of specific brands.
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