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A Critical Analysis of Concentration and Competition in the Indian Pharmaceutical Market

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  • Aashna Mehta
  • Habib Hasan Farooqui
  • Sakthivel Selvaraj

Abstract

Objectives: It 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. Methods: Indian 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 Discussion: 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. 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.

Suggested Citation

  • Aashna Mehta & Habib Hasan Farooqui & Sakthivel Selvaraj, 2016. "A Critical Analysis of Concentration and Competition in the Indian Pharmaceutical Market," PLOS ONE, Public Library of Science, vol. 11(2), pages 1-11, February.
    • Handle: RePEc:plo:pone00:0148951
    DOI: 10.1371/journal.pone.0148951
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    References listed on IDEAS

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    1. Dennis W. Carlton, 2007. "Market Definition: Use and Abuse," EAG Discussions Papers 200706, Department of Justice, Antitrust Division.
    2. Patrick Massey, 2000. "Market Definition and Market Power in Competition Analysis - Some Practical Issues," The Economic and Social Review, Economic and Social Studies, vol. 31(4), pages 309-328.
    3. Unknown & Dennis Carlton, 2007. "Market Definition: Use and Abuse," CPI Journal, Competition Policy International, vol. 3.
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    Cited by:

    1. Venkatanarayana Motkuri & Rudra Narayan Mishra, 2020. "Pharmaceutical Market and Drug Price Policy in India," Review of Development and Change, , vol. 25(1), pages 30-53, June.
    2. Habib Hasan Farooqui & Sakthivel Selvaraj & Aashna Mehta & David L Heymann, 2018. "Community level antibiotic utilization in India and its comparison vis-à-vis European countries: Evidence from pharmaceutical sales data," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-11, October.

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