Evolution of private pharmaceutical choices due to demand shifting policies like Fair Price Medical Shops (FPMS) in West Bengal

Abstract

The FPMS scheme introduced in West Bengal in June 2012 was the first of its kind public policy intervention in the pharmaceutical space. To evaluate its impact on the choices for acute drugs made available by the firms to its consumers, we used a regression analysis, using dummy and interaction variables for a panel of 21112 SKUs in Kolkata and 20747 SKUs in Rest of West Bengal. We expect that due to such an intervention, the average variety of SKUs in each subgroup will increase due to the downward price pressure. This will be seen quicker for acute drugs than for chronic drugs. Our findings reveal the following: Neurological Drugs: We see that there is a crowding out effect of the FPMS on the private stores in Kolkata due to high effectiveness of implementation and generally higher levels of awareness of the scheme. Also, higher areal density of stores in Kolkata allow for more accessibility to the FPMS and increased consumer discretion for such prescription drugs, enhance the crowding out effect. For rural West Bengal we see the opposite effect where the lack of monitoring efficacy of prescription based selling of drugs and lower areal density of the stores leads to a positive externality on the private stores. Blood Related Drugs: Since these drugs are also majorly used around a secondary/tertiary heath centre, the effect is more prominent in Kolkata and creates a negative externality for the private variety whereas a positive externality in Rest of West Bengal. Therefore, a similar story as above repeats in this supergroup of drugs as well. Dermatological drugs the complementary effect of the FPMS on the private stores is seen which in both Kolkata and Rest of West Bengal. Due to the discretionary nature of these products, the choices have to be increased continuously to attract the customers. After the FPMS, choices in private shops have increased. Also, many of these discretionary medicines will not be available in the FPMS stores due to their limited customer segments. For Pain Medicines, Respiratory drugs and Gynaecological drugs, the coefficients of the interaction variable are insignificant. Therefore, further analysis is required (such as instrumental variable regression) which is beyond the scope of this report.