Seminar  |  07/15/2020, 02:00 PM

Innovation & Entrepreneurship Seminar: Science, Pathogenic Outbreak and Market Structure – Evidence from the 2010 NDM-1 Superbug Discovery and Indian Antibiotics Market

Chirantan Chatterjee (IIM Ahmedabad)

Seminars currently take place in online format (see seminar page).

What is the relationship between science and market structure? We answer this question using the natural experiment of the NDM-1 (New Delhi Metallo-Beta-Lactamase 1) superbug discovery in India reported in August 2010 in Lancet Infectious Diseases. This article shows that NDM-1 superbug was resistant to the broad-spectrum antibiotics carbapenems, widely recognized as a weapon of last resort against infectious bacterial diseases. Using a difference in differences strategy, we find that multinational firms reduced their market share in sales of carbapenems (treated markets) in India compared to narrow-spectrum antibiotics (control markets) immediately after the NDM-1 2010 discovery. We also document a concurrent shift in the prescription behavior of physicians and associated shifts in channel incentives. Our results are robust to pre-trends, alternative controls and account for regional heterogeneity. The results are consistent also with synthetic controls. We are also able to show differential multinational responses given their apriori variation in capabilties from scientific alertness. Our findings have implications for the apriori information revealing role of science for resolving managerial uncertainty within firms and for the ex-post role of social planners in correcting market failures in healthcare. In addition, with the WHO issuing recent warnings around antimicrobial resistance during our current COVID-19 crisis, our results have important current healthcare policy implications. (Joint work with Mayank Aggarwal & Anindya Chakrabarti, IIM Ahmedabad)

Contact person: Rainer Widmann