DEPARTMENT OF ECONOMICS SEMINAR SERIES (2018-19)

Prof. Viswanath Pingali is a Professor of Economics at IIM Ahmedabad. . He is a very active researcher and has pursued various researches on Applied Game Theory, Applied Econometrics, Behavioral and Regulatory Economics and Pharmaceuticals. He has completed M.S. in Quantitative Economics from Indian Statistical Institute in Calcutta before moving to the Northwestern University to pursue M.A in Economics followed by a Ph.D in Economics. He has published extensively in peer reviewed International and national journals, like IJIO, Applied Economic Letters, Energy Policy, Journal of Health Economics, Economic Modelling, Studies in Microeconomics, EPW, among others.

Abstract
In this paper, we investigate if Indian firms and multinationals react differently to regulatory uncertainty. We answer this in the context of the Indian pharmaceutical sector. The Essential Commodities Act of 1951 provides power to the Indian Government to put a price cap on any items that are deemed necessary. In this context, the Government aimed to control the prices of certain essential drugs through a Drug Price Control Order (DPCO). The DPCO effectively caps the prices of essential drugs identified under National List of Essential Medicines (NLEM). In 2013, a set of new drugs are added to NLEM. We treat this as anticipated shock. In late 2013, the Government imposed price restriction on several other molecules that are not a part of NLEM. While these price restrictions were in place only temporarily, this can be deemed as unanticipated shock. Using the data from Indian pharmaceutical sales, we find that the reaction from domestic and multinationals has been identical for anticipated shock. However, for unanticipated shock, the multinationals reacted by drastically reducing the sale of these medicines, whereas the Indian firms' reaction has been less drastic. The study has implications for policymakers as well as management practitioners.