 Assistant Professor, Department of Resource Economics University of Massachusetts, Amherst 309B Stockbridge Hall
80 Campus Center Way Amherst, MA, 01003 Phone: (413)
545-6650
Email: dmohapatra@umass.edu
Fields of Interest: Empirical Industrial Organization, Econometrics and Applied Microeconomics. Working Papers 1. Price Control and Access to Drugs: The Case of India's Malarial Market (with Chirantan Chatterjee)
Abstract: This article investigates the effects of drug price-control policy on access to drugs and consumer welfare. We focus on regional markets for malarial drugs in India. Governments in developing and underdeveloped countries implement price controls to make drugs affordable and improve consumer welfare. However, gains from lower prices due to price control have little meaning if, firms stop selling those drugs in response to price control, and drugs are not available for purchase in local markets. In order to characterize the trade-off between availability and affordability on consumer welfare, we estimate a structural model of Indian malarial market where firms make endogenous product offering decisions across regions. We use a unique dataset that features detailed region level information. Our estimates reveal that even in a poor region, lower prices lead to lower consumer welfare, as costs of making a drug available in a regional market are high enough to induce exit of products in response to lower prices. We characterize the optimal price control level that balances the trade-off and maximizes consumer welfare.
Abstract: Over-the-counter (OTC) versions of prescription drugs can improve access and affordability, and potentially reduce spending on healthcare. To incentivize firms to conduct the R & D process required for converting prescription (Rx) drugs to OTC status, the first firm to gain approval for OTC sales of a prescription (Rx) drug enjoys three years of market exclusivity granted by the Food and Drug Administration (FDA). Firms usually, but not always, delay OTC entry until the end of their Rx patent protection. This paper studies how the FDA provision of market exclusivity affects firms' time of entry into the OTC market and, ultimately, consumer welfare. To separate the multiple offsetting incentives in this market, we estimate a dynamic oligopoly model of anti-ulcer drugs, where many, but not all, molecules have been converted at varying points in their lifecycle. The model recognizes imperfect substitution between Rx and OTC drugs and allows firms to choose price as well as timing of entry by taking into account dynamic forces such as cannibalization and preemption. We find that OTC market exclusivity policy, which is intended to encourage innovation and increase the number of OTC drugs, actually hurts consumers by delaying OTC entry until an Rx drug patent expires. For example, without the market exclusivity policy AstraZeneca would have introduced Nexium OTC in 2011instead of at patent expiry in 2014. Our analysis shows that delay of Nexium OTC entry causes consumers to lose at least 600 million dollars each year on average. We propose an alternative policy in which market exclusivity is preserved after patent expiration to an OTC drug that is introduced more than three years earlier than patent expiration, and find that the policy eliminates the incentive of strategic delay, and enhances consumer welfare.
3. Welfare Effects of Public Procurement of Medicines: Evidence from Ecuador (with Jerónimo Callejas)
[Link To Draft] (Revision requested, International Journal of Industrial Organization)
Abstract: This article evaluates the welfare implications of a public procurement program, where the Ecuadorian government procures medicines used for cancer treatment and distributes it to patients for free with the aim to benefit the poor. Using a unique dataset on Ecuador’s pharmaceutical market, we estimate a structural model of demand and supply, and focus on two research questions related to this program. First, we consider a targeting strategy commonly implemented in various developing countries, where patients below a given income threshold qualify for the free drug. We compare this with a simpler drug distribution mechanism where every patient is a potential recipient of the free drug and the patients are served on first-come-first-serve basis. Our results show that the poor patients do self-select into the program, and the first-come-first-serve strategy does benefit the poor more compared to the relatively rich. However, the targeting strategy does a much better job in serving the poorest patients. Second, we study the supply side implications of this program. Our
counterfactual exercises show that when the government procures low-cost drugs and provides them for free, it distorts the supply side incentives, and hence, market prices of similar low-cost drugs may increase by about 8% in response. Prices of the high cost drugs remain mostly unaffected. Therefore, the policy may end up negatively affecting near-poor patients that did not qualify for the free government drug.
4. Water for Sale (with Sheetal Sekhri)
[Draft available on Request]
Abstract: This paper studies the drinking water market in rural India, a setting marked by high reliance on groundwater to satisfy water needs, and rapidly falling water-tables. Using an in-depth survey of water buyers and sellers, we estimate demand for water using both an instrumental variable framework and structural estimation obtaining similar elasticities from these different procedures. We then use our structural estimates to compute consumer welfare. These markets disproportionately benefit the poor households and the households where women spend longer time to collect water indicating that a ban on extraction affecting the supply would largely affect the welfare of these households. We also estimate the extent of market power in these informal markets implementing a test we propose using our structural demand side approach and reject the null of perfect competition in those markets. This test can readily be used to assess market power in other informal markets in developing countries.
5. Public Insurance, Reimbursement Design and Access to Health-Care in India (with Sisir Debnath, and Tarun Jain)
[Draft Coming Soon]Abstract: Our article studies the design of reimbursement rates in the context of a large-scale publicly funded health insurance program in India by exploring its effects on the quality of care, diagnostic facilities provided by the hospitals and welfare of the patients. Under this insurance program implemented in the state of Andhra Pradesh, close to 40 million eligible households get free treatment from hospitals, and the hospitals are reimbursed by the government. The level of reimbursement is the key decision variable for the government. Setting the level too low implies that not enough private hospitals will participate, and the program will have capacity shortfalls and potentially lower quality. Setting the level too high implies that the fiscal burden will be high, which might be unsustainable in the future. To study this problem, we gather a unique and novel dataset that records the universe of claims made by the patients in the state of Andhra-Pradesh. Our data covers patient characteristics as well as details of diagnosis for each patient. Additionally, we collect detailed data on hospital characteristics, including provision of hospital facilities, quality of care as well as entry and exit of hospitals over time. We build a structural model and estimate the underlying incentives for patient's choice of hospital, hospitals' decision to participate in the insurance program as well as the provision of quality of care conditional on participation. Given the parameter estimates, in our counterfactual exercise, we vary the reimbursement rates, simulate hospitals' decisions to participate and provision of quality, and compute corresponding patient welfare. Our preliminary estimates suggest that adopting an alternative reimbursement policy that varies in urban and rural markets may save the Government up to 15% of its cost without compromising the access and quality of health care.
6. From Courts to Markets: New Evidence on Enforcement of Pharmaceutical Bans in India (with Chirantan Chatterjee and Manuel Estay) [Social Science & Medicine (2019) (Link)]
7. Heterogeneous Beliefs and Wealth Dynamics in a Binary Hidden Markov Model
Selected Work in Progress
1. Designing Compulsory Licensing: Consumer Welfare in Market for Antidepressants in India (with Christoph Walsh)
2. Market Structure and Quality Certification in the Coal Equipment Manufacturing Industry in China (with Jie Bai)
Courses
Empirical Industrial Organization (Second year PhD course), Fall 2016, Fall 2017, Spring 2019
Public Policy in Private Markets (Advanced Undergraduate level course), Spring 2017, Spring 2018, Fall 2018
Hunger in a Global Economy (Undergraduate level General Education course), Fall 2018
References
Prof. Panle Jia Barwick (co-advisor)
Department of Economics, Cornell University Prof. David Easley (co-advisor) Department of Economics, Cornell University dae3@cornell.edu Prof. Matthew Backus Department of Economics, Columbia Business School matthew.backus@columbia.edu Prof. Larry Blume
Department of Economics, Cornell University lb19@cornell.edu Prof. Francesca Molinari Department of Economics, Cornell University fm72@cornell.edu |