Pharma regulation: A complex problem

Medicines are critical for human wellbeing but its regulation, which is inherently complex, is even more challenging in India

- AARTHIKAM CHINTANAM

Many consumer goods contain an asymmetric information problem. It is unreasonable to think that a consumer will run tests and verify the purity and soundness of a product, especially in the case of food and drugs. As an example, on March 13, there were reports of a big fake drugs racket in Delhi. Government intervention could potentially be useful in addressing this "market failure", if commensurate state capacity can be created. On March 12, the Government of India notified the Uniform Code for Pharmaceutical Marketing Practices (UCPMP) 2024. Though well intended, this is an odd document, as it is a "voluntary" code of good ethical practices in pharmaceutical promotion activities.

Ordinarily, markets work well. When we buy clothes, we rely on the reputation of the maker. If a shirt shrinks or a button breaks, the next time around we switch brands. Customer exit creates feedback loops; firms immediately see the impact on their quarterly performance and their stock prices. This competitive process keeps the firms on their toes, vying with each other to better serve the customer.

Such trial and error by consumers is harder when it comes to food or medicines. When food is deepfried in oil that has been kept hot for hours, it generates a long-term adverse impact on the body, which the consumer may not be able to attribute to a food producer. When a spurious antibiotic still delivers a decline of the infectious disease, this is because the human body can fight most infections on its own, and a little placebo effect helps the recovery. On the other hand, many in India face poor healing because the medicines are often sub-par.