Overview

We find that the sales volumes of regulated drugs decreased post DPCO 2013. We identify alterative explanations for this decrease and rule each one out and argue that the decline is due to reduced detailing efforts by pharmaceutical firms.

Retailer Resistance

DPCO 2013 fixed the retailer margin for regulated molecules at 16%, compared to 20% for unregulated molecules (Mukherjee 2013). Press reports suggest that wholesalers and retailers insisted on the old margins so pharmaceutical firms had no option but to sell to the channel at low prices (Unnikrishnan and Unnikrishnan 2014), cutting down their own margins given the price cap on MRP. As a result, 65% of the pharmaceutical firms restored older trade margins (Vaitheesvaran 2013). This led to further lowering of manufacturer margins, thus resulting in even lower motivation to detail.

Lowered Production of Regulated Drugs

DPCO 2013 mandated that firms continue the production of regulated drugs (DPCO 2013). Firms may have lowered as much as they possibly could. We place our argument that if the doctor had prescribed a specific SKU and the same is not available in a retail store; the retailer stands to lose that business. Hence, as long as doctors were prescribing (especially the ones that are influenced by detailing – as we show), we argue that the reduction in detailing may be the reason the firms were attempting to reduce the production levels to the extent possible (and allowed).

Decline in Disease Prevalence

We extracted annual statistics on disease prevalence in India (number of cases registered in India from 2009 to 2015) from IndiaStatHealth (2023). We find that, overall there is no significant decline in number of cases post 2013 for few common disease categories which are covered under DPCO 2013 such as – i) acute respiratory infection, ii) circulatory system diseases including heart, hypertensive and cerebrovascular diseases, iii) diabetes[1], iv) HIV/AIDS, v) malaria, and iv) pneumonia; disease prevalence across ailments systematically increased from 2013 (refer Table W13 in Web Appendix K). Hence, we can rule out decrease in disease cases as the reason for the decline in sales volumes of regulated SKUs.[1] In the case of Diabetes, we only have data on number of deaths in a year. For all other categories, we present the number of cases.