Publication Type: Working Paper
Countries: Bangladesh
Authors: Mushtaq Khan, Sumaiya Khair, Salahuddin Aminuzzaman, Md Shahnur Rahman, Rezaul Jalil
Publication date: March 2024
Keywords: Health, Pharmaceuticals

In Bangladesh, as in many developing countries, the absence of regulatory information about the quality of medicines allows identical medicines to be sold at much higher prices by some brands, and poor-quality medicines persist in the market because they are hard to detect. The limited evidence from developing countries shows that price is a very poor signal of the quality across different brands selling the same medicine. In many cases, price has absolutely no relationship with quality. In addition, in countries such as Bangladesh, pharmaceutical companies illegally spend vast amounts of money bribing doctors and pharmacies to prescribe their brands as higher-quality variants of the same medicine. The artificially constructed impression of relationships between price and quality can overlay genuine differences in the quality of medicines. Selling some medicines at unnecessarily high prices has a direct welfare effect in a country where around 40% of the total spending on health is out-of-pocket spending on medicines. While average prices of medicines in Bangladesh are low on average because of licensing exemptions for the Least Developed Countries, they will increase when Bangladesh becomes subject to Trade-Related Aspects of Intellectual Property Rights (TRIPS) rules. Addressing artificially inflated medicine pricing and removing low-quality drugs from the market should be priorities for Bangladesh. In a sample of commonly prescribed medicines in Bangladesh, we found that the prices of the cheapest and most expensive brands of chemically identical formulations differed by between 16% and 200%.

When an identical pharmaceutical product sells at several different prices under different brand names, there may or may not be a correlation with quality; even if there is, the presence of some low-quality medicines in the market could be harmful and undesirable. This paper takes a novel approach to investigate the differential pricing of identical drug formulations in Bangladesh, and how this problem could be addressed. First, we review the regulatory structure for the testing and pricing of drugs in Bangladesh. We then use key informant interviews to understand how doctors are incentivised, often illegally, by pharmaceutical companies. We also assess the relative power and interests of these actors, to help identify feasible solutions. Finally, working with the regulator, the Directorate General of Drug Administration (DGDA), we investigate seven widely prescribed generic medicines sold under different brand names by competing companies. For each, we test the quality of five or more brands selling exactly the same chemical formulation, to explore whether price and quality are correlated. The best tests available to the DGDA reveal no difference in the quality of drugs across brands. While the available tests do not necessarily rule out all relevant quality differences, we conclude with policy suggestions based on this evidence and our assessment of the power and interests of different actors.

We believe that if sufficiently powerful actors do not support the implementation of regulatory requirements, their implementation in developing countries will be partial at best. On the basis of understanding of the power and interests of relevant actors, we recommend that the DGDA should explicitly define efficacy, toxicity and other relevant parameters for each chemical formulation produced by companies in Bangladesh. Then, based on improving its own testing facilities or on its interpretation and assessment of technical reports submitted by foreign laboratories, the DGDA should certify that each brand in question passes its standards for that formulation. Batches of active pharmaceutical ingredients used by different brands should also be randomly tested to maintain regulatory approval. Most importantly, the DGDA should stamp ‘Meets DGDA standards’ – or something to that effect – on each package.

Our assessment is that publicly visible certification by the DGDA that brands in the market meet pharmacological standards of efficacy and safety is likely to be effective in reducing harmful rent-seeking and corruption. This is because given the distribution of power and interests in the sector, it is likely that enough powerful actors will use this information in ways that serve the public interest. The presence of competing pharmaceutical companies, non-governmental organisations, pharmaceutical-related social enterprises and public health authorities makes it difficult for producers of drugs that fail to meet these parameters to publish fake certification on their packaging. Their competitors will call out any fakes if verification is absent from the DGDA’s website. Further, if brands meet the parameters set by the DGDA, pharmaceutical companies offering cheaper variants will be able to truthfully claim that the argument that other brands are of even ‘higher quality’ is not of material consequence to health outcomes. A large number of consumers on tight budgets may then switch to cheaper brands that meet the regulatory standards. Even a relatively small shift in demand away from overpriced brands will reduce the surplus profits that are illegally spent to influence doctors and pharmacies. Instead of the current vicious cycle, we may see the beginnings of a virtuous one.