IDEAS FOR PRACTICE - AUGUST 2019

The Emerging Role of Firms in Solving National Healthcare Inequalities in India


What role do firms have to play when public health crisis happens like with the recent encephalitis outbreak in Muzaffarpur, Bihar? One of the underlying causes it seems for this crisis has been the inadequate supply of medicines (vaccines for encephalitis in this context).  Don’t firms have a moral obligation to resolve any supply chain issues for vaccines access especially in rural areas for countries like India? Would a strict rational choice profit maximizing framework be able to attend to their social responsibilities here? How do environmental factors like healthcare institutions, economics and public policy play a moderating role here?

Two recent papers by IIMA faculty member Chirantan Chatterjee and coauthors highlight these issues in the context of the Indian pharmaceutical industry. In the first paper, Chatterjee and coauthors find that when the 2009-2010 H1N1 swine flu pandemic struck India, domestic firms more than multinational firms supplied new vaccines to attend to local vaccine needs across India given the pandemic outbreak.i They also find that government interventions to incentivize R&D through advanced market commitments in their setting didn’t have as much intended effects as apriori expected in generation of new innovations. This they argue were probably due to issues around contractual enforcement (between the social planner and the firms) that is emblematic of developing economies like India.

In the second paperii, Chatterjee and coauthors highlight the entry of a focal domestic pharmaceutical firm in India (Mankind Pharmaceuticals) generating positive competitive effects, even though they entered at the low end of the price distribution with package form differentiation in non-metropolitan areas of India. This paper demonstrates how businesses can solve the issue of health inequality sub nationally, leveraging business model innovation tying up with critical stakeholders, general practitioner physicians in rural areas in this context.

Both these papers have important policy and managerial implications which Chatterjee writes about in follow-on practitioner outlets.iii iv These papers also highlight that given past research on the footloose nature of global multinationals in the face of local crisisv, nations may want to develop national self-sufficiency in production of medicines and healthcare services. However this is a tricky mix between public policy and letting market forces flourish. In addition, the papers highlight an important point about quality of medicines and the long run health outcome of ordinary Indians. Chatterjee et al. (2018, 2019) point out that while they are not able to investigate this in their two papers it is important to examine in future work the health outcome effects of their supply side findings given its criticality for long run health and wellness of nations.vi

In follow-on work, Chatterjee and his coauthors continue to investigate these contexts, examining how sub-national heterogeneity in healthcare infrastructure, economic well-being and state-center differences in political ideologies can have an impact on heterogenous firm incentives and ability to enter local markets, survive and do well in business. In addition, physician prescriptions are being studied to understand the heterogenous role of key influencers here. These papers tie into Chatterjee’s central agenda of research around solving the international debate on access to medicines and incentives for innovation in global healthcare markets.vii

i Adbi, A., Chatterjee, C., Drev, M., & Mishra, A. (2019). When the Big One Came: A Natural Experiment on Demand Shock and Market Structure in India's Influenza Vaccine Markets. Production and Operations Management, 28(4), 810-832.
ii Adbi, A., Bhaskarabhatla, A., & Chatterjee, C. (2018). Stakeholder Orientation and Market Impact: Evidence from India. Journal of Business Ethics, 1-18.
v See: Caves, R. E. (2007). Multinational Enterprise and Economic Analysis. Cambridge Books.
vi Fuchs, V. R. (2011). Who Shall Live?: Health, Economics and Social Choice Second Edition Expanded. World Scientific Publishing Company.
vii See Chatterjee’s ICICI Bank Chair Lecture at IIMA on this issue here: https://www.youtube.com/watch?v=AfLjQYw1Wbs and listen to an IIMA podcast on this by Chatterjee here: https://soundcloud.com/iimapodcast/prof-chirantan-chatterjee-iima-discusses-access-innovation-and-public-policy-in-healthcare-markets