Tylenol 500 mg tablets. Photo: Katy Warner/Wikimedia Commons, CC BY-SA 2.0
- A group of researchers examined the monthly prices and quantities of paracetamol sold in India from March 2007 to June 2015 in 24 geographic regions.
- Their study spanned the implementation of the 2013 Drug Price Control Order and their results weren’t affected by the onset of the COVID-19 pandemic.
- They made an alarming discovery: more 650-mg than 500-mg paracetamol tablets were being produced as well as consumed in India.
- They also examined paracetamol sales data for 75 countries from 2007 to 2019 and found that the shift towards 650-mg tablets was unique to India.
- Their findings raise questions about pharma marketing practices, prescription practices of Indian physicians, and the design and implementation of price regulations.
A report in the media recently alleged that the manufacturer of a popular brand of paracetamol drug sold in India had spent Rs 1,000 crore to incentivise doctors to prescribe their brand. The Supreme Court of India has taken cognisance of the matter while some stakeholders want the pharmaceutical company to adhere to more ethical marketing practices.
One may be tempted to interpret these reports as an isolated case of extreme marketing practice by one specific company in one particularly important medicine market during the pandemic.
A study by a research group (of which I was part) found otherwise. Such practices are more systemic than isolated and rooted in the design and implementation of pharmaceutical pricing policies in India. Using data collected by India’s trade union of pharmacies, the All India Organisation of Chemists and Druggists, we examined the monthly prices and quantities of paracetamol sold from March 2007 to June 2015 in 24 geographic regions that correspond roughly to states in India.
The period of our study was significant because it spanned the implementation of the 2013 Drug Price Control Order (DPCO), and our results were not affected by the onset of the COVID-19 pandemic.
Our results were striking, but before I discuss them, it is useful to understand the design and limitations of the 2013 DPCO.
1. It regulated some dosages of a medicine considered essential but left other dosages of the same medicine unregulated;
2. it regulated single-ingredient medicines but kept multiple-ingredient medicines, commonly known as fixed-dose combinations, out of the ambit of the regulation; and
3. it employed a market-based method to determine the ceiling price that was based on the prevailing prices of the brands with more than one percent market share in the year before the implementation of the regulation.
Each of these design choices in the 2013 DPCO influences how firms market their medicines.
Coming to our results: in the case of paracetamol – 500 mg tablets were regulated but the 650 mg tablets remained unregulated. While one can engage in academic debates on the merits of such incomplete regulation, in practice, the regulation led to a decline in the relative share of 500-mg tablets being produced as they were comparatively less profitable than 650-mg tablets. Instead, firms began to increase the relative share of production of the 650-mg tablets.
We were alarmed that not only were more 650-mg tablets being produced but they were also being consumed more. The share of 500-mg tablets sold as a proportion of 500-mg and 650-mg tablets decreased from around 75% in March 2007 to about 50% by sales volume.
Moreover, in the market for paracetamol, 650-mg tablets are not common in many parts of the world. For adults in the US, regular-strength Tylenol® contains 325 mg, extra-strength contains 500 mg, and 650 mg is reserved for minor arthritis, osteoarthritis and joint pain. Yet, 650-mg tablets have gained unprecedented popularity in India, and we were puzzled particularly because the price of 650-mg tablets also increased during this period.
It is difficult to explain why consumers in India would purchase more of the costlier 650-mg tablets when the cheaper 500-mg alternative existed. After all, the goal of the 2013 DPCO was to make 500-mg tablets more accessible to consumers.
Here is where the role of marketing expenditures and physician prescriptions arises. Using marketing expenses in the ProwessIQ dataset of the Centre for Monitoring the Indian Economy (CMIE) as a proxy, we found in our study that firms that spent more on marketing reduced their relative share of 500-mg tablet production more and raised their 650-mg tablet prices more as the regulation approached implementation as well as in the months after the regulation was implemented.
Ideally, we would measure the marketing expenditure specific to the promotion of paracetamol tablets by a given firm. But such data is hard to come by. Our use of CMIE data was therefore a reasonable choice.
To further examine the robustness of our results, we used the number of prescriptions in antibacterials as a proxy for a pharmaceutical firm’s ability to shift demand towards a specific dosage in the paracetamol market. The advantage of this measure is that it is available not only for publicly listed firms that disclose marketing expenditures but also for a large number of unlisted firms in our study.
Our results remained similar, suggesting that firms’ marketing expenditures determined their relative shares of production of regulated and unregulated dosages, their relative prices, and sales.
One could argue that a shift from 500 mg to 650 mg is a global trend driven likely by new scientific knowledge and modern prescription practices. To refute this, we examined paracetamol sales data for 75 countries, including India, from 2007 to 2019 and found that the shift towards 650-mg tablets was unique to India, regardless of whether the comparison is made with countries around the world or those in South Asia.
Naturally, the rapid expansion of the 650-mg dosage market defying fundamental principles of economics raises serious questions about the marketing practices of pharmaceutical firms, about the prescription practices of physicians in India, and the design and implementation of price regulations for pharmaceuticals.
Ajay Bhaskarabhatla is an associate professor in the Department of Applied Economics, Erasmus School of Economics, Erasmus University, Rotterdam.