Abstract
ObjectivesIt can be argued that with several players marketing a large number of brands, the pharmaceutical market in India is competitive. However, the pharmaceutical market should not be studied as a single market but, as a sum total of a large number of individual sub-markets. This paper examines the methodological issues with respect to defining the relevant market involved in studying concentration in the pharmaceutical market in India. Further, we have examined whether the Indian pharmaceutical market is competitive.MethodsIndian pharmaceutical market was studied using PharmaTrac, the sales audit data from AIOCD-AWACS, that organises formulations into 5 levels of therapeutic classification based on the EphMRA system. The Herfindahl-Hirschman Index (HHI) was used as the indicator of market concentration. We calculated HHI for the entire pharmaceutical market studied as a single market as well as at the five different levels of therapeutic classification.Results and DiscussionWhereas the entire pharmaceutical market taken together as a single market displayed low concentration (HHI = 226.63), it was observed that if each formulation is defined as an individual sub-market, about 69 percent of the total market in terms of market value displayed at least moderate concentration. Market should be defined taking into account the ease of substitutability. Since, patients cannot themselves substitute the formulation prescribed by the doctor with another formulation with the same indication and therapeutic effect, owing to information asymmetry, it is appropriate to study market concentration at the narrower levels of therapeutic classification.
Highlights
Medicines worth Rs. 74,895 Crore were marketed in the retail market in India between February, 2013 and January, 2014
Whereas the entire pharmaceutical market taken together as a single market displayed low concentration (HHI = 226.63), it was observed that if each formulation is defined as an individual sub-market, about 69 percent of the total market in terms of market value displayed at least moderate concentration
Patients cannot themselves substitute the formulation prescribed by the doctor with another formulation with the same indication and therapeutic effect, owing to information asymmetry, it is appropriate to study market concentration at the narrower levels of therapeutic classification
Summary
Medicines worth Rs. 74,895 Crore (or USD 12.62 Billion) were marketed in the retail market in India between February, 2013 and January, 2014. The argument for the competiveness of pharmaceutical market cannot be taken at face value because pharmaceutical market is not a single market but a sum total of a large number of individual sub-markets. This is because medicines used in the treatment of a particular health condition, cannot be substituted with medicines used in the treatment of another health condition. “Economic markets identify the range of products and geographic areas for which arbitrage keeps price linked. This does not establish whether or not a firm or firms have market power.” [1]
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