National Pharmaceutical Pricing Authority (NPPA): Influencing Customer Behaviour
(11 pages of text)
Since its inception in 1997, the National Pharmaceutical Pricing Authority (NPPA) had been trying to control drug prices through various supply-side initiatives, which had yielded limited success. This time around, NPPA had announced a new initiative, which was aimed at educating consumers about the inexpensive alternatives for medicines prescribed by doctors. By giving consumers information about various brands and their prices, NPPA hoped to offer customer self-selection of drugs through short message service (SMS, or “texting”). NPPA appeared to be operating on the premise that customer self-selection could result in self-regulation of consumption, thereby giving greater control of health care expenses to customers. Given the huge penetration of mobile phones in India and the gradual reduction of various mobile service charges, text-based service looked feasible. However, the proposed system had met with strong opposition from other stakeholders, such as doctors and chemists. Besides, the large-scale adoption of the proposed service was being questioned as the decision-making process for medicines was very complex.
This case can be used at the MBA level in an introductory course on marketing management and consumer behaviour or in a health care course. The case helps in:
- Gaining a deeper understanding of the consumer decision-making process.
- Understanding the roles and potential inter-player influences in a complex decision-making unit.
- Providing a deeper insight into the existing medicine supply chain and an appraisal of the drug pricing system of India.
- Introducing students to the concept of moral hazard and adverse selection in the health care context.
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