Merck vs Roche: Towards Differential Pricing in India

SPICY IP:

SpicyIP has often lamented the lack of a robust differential pricing model by big pharma. As our earlier post demonstrated, Roche charges the same (or even more) in India than it does in the US and other “developed” countries!

Granted there is the oft touted threat of “parallel imports”. However, I’m not sure as to the likely quantum of losses from such parallel imports into the more developed markets and whether such losses would be severe as to make serious inroads into R&D incentives. Further, we’d blogged earlier on potential technology solutions to prevent such imports. Apart from the example of GSK, we haven’t seen any evidence of other innovative companies adopting such a solution.

The failure to adopt a differential pricing (DP) model on grounds of the threat of parallel imports reminds one of the Napster debate. Till an infringing model (at least in the eyes of the US court in question) came along, none of the record companies were interested in harnessing the potential of the internet to distribute music. Thanks to iTunes and a now legal “napster”, we know that online models work well and copyright owners and record companies stand to make sufficient moneys by harnessing this new technology medium.

Which leads to the question: why don’t pharma companies spend more money and encourage more R&D into technology for preventing parallel imports? But before asking this question, we may also need to step back and ask: Are “parallel imports” the real issue here? As one of the earliest reporters on IP and access issues, Tina Rosenberg (a Pulitzer prize winning reporter with the New York Times) suggested, this fear of differential pricing could be more deep-rooted i.e. a lower price in India would lead to demands for lower prices in the home markets of the US and…


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