Science, Pathogenic Outbreak & Market Structure: Evidence from the 2010 NDM - 1 Superbug Discovery & Indian Antibiotics Market
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 (treatment group) in India compared to narrow-spectrum antibiotics (control group) immediately after the NDM-1 2010 discovery. We also document a concurrent shift in the prescription behavior of physicians and the associated shifts in channel incentives. Our results are robust to pre-trends, alternative controls and while accounting for regional heterogeneity. The results are consistent with synthetic controls. Our findings have implications both for the apriori information revealing the role of science for resolving managerial uncertainty within firms and for the ex-post role of social planners in correcting market failures, especially in healthcare markets.
The draft version of the paper can be found under "DOCUMENTS".