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Harvard Case - National Pharmaceutical Pricing Authority (NPPA): Influencing Customer Behaviour

"National Pharmaceutical Pricing Authority (NPPA): Influencing Customer Behaviour" Harvard business case study is written by K.R. Jayasimha, Mukherjee Srabanti. It deals with the challenges in the field of General Management. The case study is 14 page(s) long and it was first published on : May 25, 2012

At Fern Fort University, we recommend the National Pharmaceutical Pricing Authority (NPPA) adopt a multi-pronged strategy to influence customer behaviour, focusing on transparency, accessibility, and value-based healthcare. This strategy leverages digital transformation, data-driven decision making, and strategic partnerships to empower consumers and promote responsible pharmaceutical consumption.

2. Background

The NPPA, an Indian regulatory body, faces the challenge of ensuring affordable and accessible medicines while promoting rational drug use. This case study explores the NPPA's efforts to influence customer behaviour, particularly in the context of rising healthcare costs and increasing demand for pharmaceuticals.

The main protagonists are the NPPA, pharmaceutical companies, healthcare providers, and consumers. The NPPA seeks to balance the interests of all stakeholders while ensuring the availability of essential medicines at reasonable prices.

3. Analysis of the Case Study

Strategic Framework: The analysis uses a combination of Porter's Five Forces, SWOT analysis, and Balanced Scorecard to understand the NPPA's strategic landscape and identify key areas for improvement.

Porter's Five Forces:

  • Threat of New Entrants: Moderate, as the pharmaceutical industry requires significant investment and regulatory hurdles.
  • Bargaining Power of Buyers: High, as consumers have access to information and can choose from various options.
  • Bargaining Power of Suppliers: Moderate, as the NPPA regulates pricing and can influence supplier behaviour.
  • Threat of Substitutes: Moderate, as alternative therapies and generic medicines exist.
  • Competitive Rivalry: High, as numerous pharmaceutical companies compete for market share.

SWOT Analysis:

Strengths:

  • Strong regulatory authority
  • Focus on affordability and accessibility
  • Growing awareness of rational drug use

Weaknesses:

  • Limited resources and capacity
  • Dependence on industry data
  • Lack of direct consumer engagement

Opportunities:

  • Leverage digital technology for transparency and communication
  • Partner with healthcare providers and NGOs
  • Promote value-based healthcare initiatives

Threats:

  • Increasing pressure from pharmaceutical companies
  • Rising healthcare costs
  • Lack of consumer awareness

Balanced Scorecard:

  • Financial Perspective: Ensure sustainable financing for NPPA operations and initiatives.
  • Customer Perspective: Enhance consumer understanding of drug efficacy and safety.
  • Internal Processes Perspective: Improve efficiency and effectiveness of regulatory processes.
  • Learning and Growth Perspective: Foster innovation and develop capacity for data analytics.

4. Recommendations

1. Digital Transformation:

  • Develop a user-friendly online platform: Provide comprehensive information on medicines, pricing, and safety guidelines.
  • Implement a mobile application: Enable consumers to access information, compare prices, and report adverse drug reactions.
  • Utilize data analytics: Analyze prescription data to identify trends and inform pricing policies.

2. Strategic Partnerships:

  • Collaborate with healthcare providers: Educate doctors and pharmacists on rational drug use and promote evidence-based prescribing practices.
  • Engage with NGOs and patient advocacy groups: Raise awareness about medication safety and promote responsible self-medication.
  • Partner with pharmaceutical companies: Encourage innovation and development of affordable generic medicines.

3. Value-Based Healthcare:

  • Promote the use of generic medicines: Emphasize their effectiveness and cost-effectiveness.
  • Encourage preventive healthcare: Educate consumers on lifestyle choices that reduce the need for medication.
  • Implement disease management programs: Provide support and resources for chronic conditions.

4. Transparency and Accountability:

  • Publish drug pricing data online: Ensure transparency and allow consumers to compare prices.
  • Conduct regular audits of pharmaceutical companies: Monitor compliance with regulations and pricing policies.
  • Establish a robust grievance redressal mechanism: Address consumer complaints and ensure accountability.

5. Basis of Recommendations

These recommendations align with the NPPA's mission to ensure affordable and accessible medicines while promoting rational drug use. They consider the needs of both external customers (consumers) and internal clients (healthcare providers and pharmaceutical companies).

The recommendations leverage the NPPA's regulatory authority and capitalize on the opportunities presented by digital technology and strategic partnerships. They are also supported by quantitative measures, such as increased consumer awareness, improved medication adherence, and reduced healthcare costs.

6. Conclusion

By embracing digital transformation, strategic partnerships, and value-based healthcare, the NPPA can effectively influence customer behaviour and achieve its goals. This approach will empower consumers, promote responsible pharmaceutical consumption, and ensure the availability of affordable and accessible medicines for all.

7. Discussion

Alternative Options:

  • Stricter price controls: This could lead to shortages or discourage innovation.
  • Limited consumer engagement: This would miss the opportunity to empower consumers and promote self-care.

Risks and Assumptions:

  • Resistance from pharmaceutical companies: This can be mitigated through collaboration and clear communication.
  • Limited digital literacy among consumers: This can be addressed through targeted outreach and capacity building programs.

8. Next Steps

  • Develop a detailed implementation plan: Define roles, responsibilities, and timelines for each recommendation.
  • Secure funding and resources: Allocate budget and personnel for digital infrastructure, partnerships, and outreach programs.
  • Conduct pilot projects: Test and refine strategies before implementing them nationwide.
  • Monitor and evaluate progress: Track key performance indicators (KPIs) and make adjustments as needed.

By taking these steps, the NPPA can effectively influence customer behaviour and create a more sustainable and equitable healthcare system for all.

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Case Description

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.

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