Factors affecting the decision to purchase innovative pharmaceutical products by the thai pharmaceutical industry


Technopreneurship and Innovation Management Program, Graduate School, Chulalongkorn University, Bangkok, Thailand
Department of Commerce, Chulalongkorn Business School, Chulalongkorn University, Bangkok, Thailand
Department of Pharmaceutics and Industrial Pharmacy, Chulalongkorn University, Bangkok, +66-83-455-9393, Thailand

Abstract

The purpose of this paper is to investigate the relationship between factors affecting the decision to purchase and the need for innovative pharmaceutical products by the Thai pharmaceutical industry. An orally disintegrating tablet (ODT) is an example of an incremental pharmaceutical innovative product which is still a new concept in Thailand. The results show that financial factors, as well as government policy and drug regulations, have a positive effect on the purchasing decision of pharmaceutical excipients for ODT from the Thai pharmaceutical industry.

Keywords

purchasing decision, pharmaceutical excipients, orally disintegrating tablet (ODT), innovative product, Thai pharmaceutical industry

Introduction

The Thai pharmaceutical industry is currently being hampered from importing pharmaceutical products because of social expectations, consumer responsibility, encouragement, cost of research and development, quality assurance, and the regulatory and registration procedures of Thailand’s Food and Drug Administration (Thai FDA). The Thai pharmaceutical industry is confronted with a decrease in the value of the country’s domestic pharmaceutical products compared to imports. Moreover, there are many threats from the cooperation of Southeast Asian countries, resulting in ASEAN harmonization in many areas, such as with the Pharmaceutical Inspection Cooperation Scheme in Good Manufacturing Practice (PIC/s GMP) and the proliferation of transnational drug companies in Thailand due to the Free Trade Agreement (FTA) between Thailand and the United States of America for business benefit. This phenomenon has led to the closure of many domestic businesses.

Nonetheless, technological changes in the pharmaceutical industry have a significant influence on innovation (Malerba, 2002). Advancement in pharmaceutical innovation involves two components: active pharmaceutical ingredients (API) and pharmaceutical excipients. API are chemicals used for curing and alleviating diseases. The development of API takes time, with at least 16 years being necessary for the completion of all phases (Nolan, Oppenheim, & Withers, 1980). In Thailand, there has never been complete API development due to the high cost and time required. Thus, in Thailand, the development of an innovative pharmaceutical product should emphasize pharmaceutical excipients since they have a greater potential for success than API.

However, there is no evidence to suggest that the Thai pharmaceutical industry will adopt such an innovative product. Thus, the purpose of this paper is to investigate which factors affect the decision to purchase innovative pharmaceutical excipients from the Thai pharmaceutical industry by using pharmaceutical excipients for ODT as the case study. The factors affecting the decision to purchase an innovative product from the Thai pharmaceutical industry are investigated and discussed. Thus, this research can be used as a guideline for assessing the purchasing decision of the Thai pharmaceutical industry toward other pharmaceutical innovative products.

This research is divided into six sections, the first of which provides an introduction. Secondly, an explanation of the background to ODT and the factors influencing the purchasing decision are reviewed. The third section outlines the methodology used to develop and validate the conceptual framework. The fourth section provides the results of the purchase intention and the factors affecting the decision to purchase an innovative product from the Thai pharmaceutical industry. The fifth section provides the results and discusses the factors affecting the decision to purchase, focusing on five components. Finally, the last section concludes the research findings and proposes ideas for future research.

Literature Review

Innovative products are unlikely to be successful in the marketplace due to a lack of customers demand. Thus, whether or not the pharmaceutical industry in Thailand should adopt innovative products is an interesting topic. In this section, the background to ODT, and factors affecting the decision to purchase an innovative product are reviewed.

Orally disintegrating tablet (ODT)

The ODT is in oral dosage form, immediately dissolving or disintegrating in the mouth without water or other liquids (Watanabe et al., 1995). According to the United States Pharmacopeia 41 (USP41) and the National Formulary 36 (NF36), the ODT tablet must take no longer than one minute to dissolve, depending on the design and composition of the formula. The ODT is suitable for bed-ridden patients, children, the elderly, or psychotic patients (Nagar et al., 2011). It also elevates the patient’s compliance since it can be taken without water. The ODT formula comprises only active pharmaceutical ingredients (API) and suitable pharmaceutical excipients.

Active pharmaceutical ingredient (API)

API is a specific chemical for the purpose, with no special ODT requirement. In general, researchers use several drugs to produce ODT, such as anticonvulsants, antibiotics, analgesics, diuretics, neuroleptics, as well as antidiarrheal, anticancer, and heart disease medication.

Pharmaceutical excipients for ODT

The development of ODT by direct compression involves specially designed pharmaceutical excipients to reduce disintegration time. Therefore, finding alternative pharmaceutical excipients for ODT is very important.

Factors affecting the decision to purchase an innovative produc t

A review of the available literature reveals various factors affecting the decision to purchase an innovative product, as summarised in Table 1.

The literature review highlighted a lack of research on the identifying factors affecting the decision to purchase innovative products in the Thai pharmaceutical industry. Therefore, this study proposes a conceptual framework for investigating this aspect, consisting of five components: 1) financial factors, 2) marketing factors, 3) production factors, 4) innovation factors, and 5) government policy and drug regulation factors, with the following hypotheses.

H1: Financial factors are affecting the decision to purchase an innovative product in the Thai pharmaceutical industry

H2: Marketing factors are affecting the decision to purchase an innovative product in the Thai pharmaceutical industry

H3: Production factors are affecting the decision to purchase an innovative product in the Thai pharmaceutical industry

H4: Innovation factors are affecting the decision to purchase an innovative product in the Thai pharmaceutical industry

H5: Government policy and drug regulation factors are affecting the decision to purchase an innovative product in the Thai pharmaceutical industry

Table 1: Factors affecting the decision to purchase an innovative product according to the literature review

Components

Indicators

References

Financial Factors

Reduced production cost

Pharmaceutical excipients for ODT help to reduce the cost of production

(Novak & Popesko, 2014)

Reduced expenditure

Pharmaceutical excipients for ODT help to reduce expenditure

(Hsieh & Sloan, 2008)

Economies of scale

Pharmaceutical excipients for ODT have economies of scale

(DiMasi, Hansen, & Grabowski, 2003)

No additional investment

Pharmaceutical excipients for ODT can be used alone without additional investment

(DiMasi et al., 2003)

Return on investment

Pharmaceutical excipients for ODT enhance investment returns

Profitability

Pharmaceutical excipients for ODT are profitable

(Ekelund & Persson, 2003) (DiMasi, Hanson, Grabowski, & Lasagna, 1991)

Marketing Factors

Need for the product

The market needs pharmaceutical excipients for ODT

(Abbott, 1995; DiMasi, Grabowski, & Vernon, 1995; Nolan et al., 1980)

Patient compliance

Pharmaceutical excipients for ODT enhance patient compliance

(Chauhan & Mason, 2008)

Target customers

Pharmaceutical excipients for ODT have a clear customer target

(Nolan et al., 1980)

Size of the target market

Pharmaceutical excipients for ODT have a large target market

(Manchanda & Honka, 2005)

Advertising costs

Pharmaceutical excipients for ODT can reduce advertising costs

(Liu & Gupta, 2012; Manchanda & Honka, 2005)

Distribution channels

Pharmaceutical excipients for ODT have many distribution channels

(Liu & Gupta, 2012; Malerba, 2002)

Production Factors

Capable of use with general tableting machines

Pharmaceutical excipients for ODT can be used with general tableting machines

(Al-khattawi & Mohammed, 2013; Nagar et al., 2011)

Capable of use with other production lines

Pharmaceutical excipients for ODT can be used with other production lines in the pharmaceutical industry

(Al-khattawi & Mohammed, 2013; Lawrence, 2008; Nagar et al., 2011; Zucker & Darby, 2001)

Compatibility with APIs and other

pharmaceutical excipients

Pharmaceutical excipients for ODT are compatible with APIs and other pharmaceutical excipients

(Al-khattawi & Mohammed, 2013; Lawrence, 2008; Nagar et al., 2011)

Increase productivity

Pharmaceutical excipients for ODT can increase productivity

(DiMasi et al., 2003)

Reduce production errors

Pharmaceutical excipients for ODT help to reduce errors in production

(Curieux-Belfond, Vandelac, Caron, & Séralini, 2009; Gilmore & Smith, 1996; Lawrence, 2008)

Save time in production

Pharmaceutical excipients for ODT help to reduce production time

(Curieux-Belfond et al., 2009; Gilmore & Smith, 1996; Lawrence, 2008)

Innovation Factors

New knowledge acquisition

Pharmaceutical industries will acquire new knowledge through the use of pharmaceutical excipients for ODT

(Cardinal, 2001; DiMasi et al., 1995; DiMasi et al., 2003)

Capable of representing other products in the industry

Pharmaceutical excipients for ODT have the capability to represent other products in the industry

(Malerba, 2002)

Capable of developing their own patent

Pharmaceutical excipients for ODT have the ability to develop their own patent for the pharmaceutical industry

(Grabowski, Vernon, & DiMasi, 2002; Nolan et al., 1980)

Reduce research and development costs

Pharmaceutical excipients for ODT help to reduce research and development costs

(DiMasi et al., 2003; Grabowski, 1989; Grabowski et al., 2002)

Reduce failure in new product development

Pharmaceutical excipients for ODT help to reduce failure in new product development

(Alkhateeb, Khanfar, & Loudon, 2009; Malerba, 2002)

Value-added to the product

Pharmaceutical excipients for ODT help to add value to new products

(Hsieh & Sloan, 2008)

Government policy and drug regulation factors

FDA approval in drug registration

Pharmaceutical excipients for ODT ensure drug registration approval by the FDA

(Danzon & Chao, 2000; Kola & Landis, 2004)

Financial support policy

The government has set a financial support policy regarding pharmaceutical excipients for ODT

(Maynard & Bloor, 2003)

Tax reduction policy

The government has set a tax reduction policy regarding pharmaceutical excipients for ODT

(Kyle, 2007)

Technological transfers

Agreement between the government and pharmaceutical industry regarding pharmaceutical excipients for ODT

(Maynard & Bloor, 2003)

Agreement between the government and pharmaceutical industry

Agreement between the government and pharmaceutical industry regarding pharmaceutical excipients for ODT

Pharmaceutical standards and safety

Pharmaceutical standards and safety ensure to use

pharmaceutical excipients for ODT

(Grabowski, Vernon, & Thomas, 1978)

https://typeset-prod-media-server.s3.amazonaws.com/article_uploads/eededd53-ed67-44b8-add4-a33f6a23953a/image/c3a0ca59-5950-4084-b9b0-0c682fb9cfa9-upicture1.png
Figure 1: Conceptual Framework for the decisionto purchase an innovative product

Table 2: Demographic characteristics of respondents and firms (n=192)

Characteristics

Frequency

Percentage

Education

Bachelor’s degree

70

36.46

Master’s degree

117

61.57

Doctor of Philosophy

5

1.97

Job position

Managing director

6

3.10

Manager

36

18.80

Supervisor

54

28.10

Other

96

50.00

Duration of business

Under 10 years

90

46.90

10–20 years

12

6.30

20–30 years

6

3.10

Over 30 years

84

43.80

Type of business

Distributor

24

11.76

Pharmaceutical manufacturer

64

47.05

Supplementary manufacturer

18

8.82

Exporter

24

11.76

Other

42

20.58

Type of firm

Single owner

18

9.40

Limited partnership

6

3.10

Limited company

142

84.40

Public company

6

3.10

Income of business

Under 50 million baht

42

22.30

50–200 million baht

60

33.30

Over 200 million baht

78

43.30

Number of employees

Less than 50

30

15.60

50–200

75

46.90

More than 200

72

37.50

The conceptual framework for investigating five hypotheis is shown in Figure 1.

Materials and Methods

Data collection

A survey questionnaire involving pharmacists currently working in the Thai pharmaceutical industry was used as the method for collecting data by purposive sampling. The quantitative method was applied to reduce bias. The questionnaires were distributed to respondent pharmacists from a list issued by the Thai FDA. The questionnaires were in the Thai language and consisted of four parts,

1) demographics and basic data on the respondents,

2) corporate data consisting of general information on companies and sales and products,

3) a five-point Likert scale rating of five factors, each consisting of six indicators, with a total of 30 questions, and

4) open-ended remarks and suggestions. The questionnaire was validated by three experts in the pharmaceutical field using the index of item-objective congruence (IOC).

The data from the questionnaire was collected and analysed using a five-point Likert scale. The questionnaire was sent directly to participants in paper and online format. The factors were calculated using multiple regression SPSS version 22. The raw data was examined via factor analysis, correlation analysis, reliability analysis, and regression analysis.

Variables and measurements

Independent variables: the independent variables consist of five factors: financial, marketing, production, innovation, as well as government policy and drug regulation. The independent variables were measured using a five-point Likert scale.

Dependent variable

The decision to purchase is the dependent variable. The dependent variables were measured using a five-point Likert scale.

Validity and reliability analysis

In this research, the collected data was measured for reliability and validity. Validity is the degree to which the test measures what it is supposed to measure. Reliability refers to the stability and consistency of the measurement. Factor analysis was used to assess the validity and produce a set of observable variables.

The research was validated by sending the questionnaire to three experts in the pharmaceutical field. All experts gave their comments, which led to the modification and improvement of the questionnaire.

The consistency method was applied to measure the reliability of this research. Cronbach’s alpha coefficient was used to test reliability, with a value of 0.6 considered acceptable, and 0.8 and above indicating a high level of reliability.

Correlation and regression analysis

Respondents were requested to consider each factor in the questionnaire, consisting of six indicators. The average score for each indicator was then calculated. Pearson correlation was performed to identify the relationship between the financial, marketing, production, innovation as well as government policy and drug regulation factors. Multiple regression analysis was also performed to test the five hypotheses concerning the decision to purchase an innovative product.

Results and Discussion

Demographics of respondents

The demographic characteristics of the respondents include education, job position, duration of business, type of business, type of firm, business income, and a number of employees. The results are shown in Table 2.

Table 3: Reliability analysis

Variables

Cronbach’s Alpha

Financial factors

0.790

Marketing factors

0.740

Production factors

0.780

Innovation factors

0.770

Government policy and drug regulation factors

0.760

Decision to purchase an innovative product

0.730

Validity and reliability analysis

The purpose of validity and reliability analysis is to ensure the results are free from random errors. In this study, the IOC is performed by specialists. All questions have an IOC of between 0.6–1.0, implying that the variables are valid. Consistency testing is examined by Cronbach’s alpha coefficient, ranging from 0 to 1. The higher the Cronbach’s alpha coefficient, the greater the reliability. The analysis is shown in Table 3, indicating that the questionnaire is a reliable instrument for measuring the variables.

Correlation analysis of variables

Pearson correlation is used to identify the correlation between financial, marketing, production, innovation, as well as government policy and drug regulation factors. A correlation coefficient ranging from 0.10 to 0.29 is considered weak, 0.30 to 0.49 medium, and 0.50 to 1.0 strong. However, to avoid multicollinearity, the correlation coefficient should not go above 0.8 (Wang & Benbasat, 2007). Positive correlation represents that one variable increases or decreases in line with another. Conversely, a negative correlation means that one variable does not increase or decrease in line with another. The results of this study show that there is no multicollinearity. There is a correlation between innovation and marketing factors, indicating a positive effect (0.273). Innovation and production factors have a negative relationship (-0.285). The correlation matrix is shown in Table 4.

Table 4: Correlation matrix

Financial

Marketing

Production

Financial factors

1.000

Marketing factors

-.112

1.000

Production factors

-.062

-.161

1.000

Innovation factors

-.037

.273*

-.285*

1.000

Government policy and drug regulation factors

-.137

-.170

.099

.007

1.000

Statistically significant at: p < 0.05 (2–tailed)

Multiple regression analysis

Multiple regression analysis is conducted on the model with data manipulation used to remove outliers. From the original 192 respondents, 185 remained in the sample after removal of the outliers. Correlation analysis is employed to test the interaction between variables, whereas regression analysis is conducted to test hypotheses H1, H2, H3, H4, and H5. The correlations are shown in Table 5. The enter method is used for multiple regression analysis. The model shows a good fit with a p-value of 0.000 (which is not greater than 0.05). The collinearity adjustment R2 is 30.90%.

Table 5: Multiple regression analysis

Multiple R

R2

Adjust R2

Standard Error

F

Sig. F

.575

.331

.309

.73965

14.754

0.000

Variables in the equation

Variables

B

Std. Error

Beta

t

Sig.

Financial factors

1.173

.165

.458

7.106

.000*

Marketing factors

-.090

.128

-.046

-.704

.482

Production factors

.058

.116

.034

.504

.615

Innovation factors

.103

.121

.058

.854

.394

Government policy and drug regulation factors

.235

.085

.180

2.757

.006*

Hypothesis testing

Hypothesis 1

H1 posits that a relationship exists between financial factors and the decision to purchase (p = 0.000). Its p-value is under 0.05, positing that H1 is strongly supported. The results of the tests reveal (Beta = 0.458, t = 7.106) that the decision to purchase an innovative product is a major determinant.

Hypothesis 2

H2 shows that marketing factors are not related to the decision to purchase (p = 0.482). The data in Table 5 (Beta = -0.046 and t = -0.704) indicates that marketing factors have an insignificant effect on the decision to purchase an innovative product.

Hypothesis 3

H3 exhibits that production factors do not have a significant relationship with the decision to purchase (p = 0.615). The data in Table 5 (Beta = 0.034, t = 0.504) indicates that production factors do not affect the decision to purchase an innovative product.

Hypothesis 4

H4 reveals that the relationship between innovation factors and the decision to purchase is insignificant (p = 0.073). Variables in the equation (Beta = 0.058, t = 0.854) indicate that the decision to purchase does not substantiate the results of other studies on innovation factors.

Hypothesis 5

H5 displays that government policy and drug regulation factors have a relationship with the decision to purchase (p = 0.006). Its p-value is under 0.05, from which it can be concluded that H5 is supported. In addition, from the findings Beta = 0.180 and t = 2.757, it can be concluded that the decision to purchase is less likely when the effect of government policy and drug regulation factors increases.

From the findings, it can be concluded that the factors affecting the decision to purchase are financial and also relate to government policy and drug regulation. Financial and government policy and drug regulation factors are shown to have a positive effect on the decision to purchase with a standardised coefficient of 0.458 and 0.180, respectively.

Factors affecting the decision to purchase an innovative product in the Thai pharmaceutical industry were based on multiple regression and assessed using SPSS software version 22, where the established model was found to be acceptable. Details of the factors are described below:

Financial factors

Financial factors were found to be the most important, and have a positive effect on the decision to purchase an innovative product from the Thai pharmaceutical industry. This is no surprise since it confirms the experts’ opinion that most pharmaceutical companies would prefer a reduction in the cost of pharmaceutical excipients. It also concurs with the suggestion by Wiggins (1991) that the cost of capital affects product validity. This is also similar to other industries in that the cheaper the raw materials, the greater the profit.

Marketing factors

Marketing factors were found to be insignificant. (Nolan et al., 1980) state that a decrease in marketing may result in increased costs for developing new drugs, leading to more safety regulations, which may prolong the time interval between patenting and marketing. However, according to the interviews with experts, marketing may impact on the consumer but was not shown to be important to the manufacturer since drug sales in Thailand are not influenced by users but by law and regulation or governance.

Production factors

Production factors were not found to be significant. Pharmaceutical production of tablets involves milling, mixing, granulating, drying, and tableting (Lawrence, 2008). Lawrence also states that critical raw material attributes, process parameters, and design space lead to product development. If there are fewer production steps, the production time is also reduced. However, some respondents reported that there are various problems affecting production time as well as production steps, such as out of service machinery or human error.

Innovation factors

Innovation factors were found to be insignificant. (Hsieh & Sloan, 2008) investigated the adoption of pharmaceutical innovation and the growth of drug expenditure in Taiwan, finding that overall, the adoption of pharmaceutical product innovation is worth the increased cost of new drugs. The respondents commented that Thai patients paid little attention or were unaware of innovation since they did not feel it was important to them or had no usefulness. However, the government should encourage and emphasise the advantages of innovation by providing more knowledge to the public.

Government policy and drug regulation factors

Government policy and drug regulation factors were ranked second in affecting the decision to purchase an innovative product from the Thai pharmaceutical industry. (Danzon & Chao, 2000) reported that generic drug competition has a significantly negative effect on free price regulation in the United States, United Kingdom, Germany, and Canada, whereas, in countries with strict price regulation such as France, Italy, and Japan, the number of generic competitors has either no effect or a positive effect on prices. In Thailand, price competition and drug registration are controlled, specifically in relation to pharmaceutical products regulated by the Thai FDA. These regulations influence the registration of pharmaceutical products. Hospitals are the biggest buyers of pharmaceutical products and must follow the regulations of the FDA. Hence, government policy and drug regulation factors affect the decision to buy ODT products from the pharmaceutical industry, as also confirmed by experts.

The results from respondents show that they decided to purchase pharmaceutical excipients for ODT, with an average score of 4.56 from 5.00 (S.D.= 1.82). This suggests that the price of an innovative product is extremely relevant to Thai people because their importance has not been emphasized. They suggest that good technological exploitation should incorporate the government, private sector, and small, medium-sized enterprises. However, there are many barriers to technological exploitation, such as the amount of supporting data needed to convince authorities concerning the laws and regulations of the FDA and ensure confidence in the quality of drugs in Thailand.

Conclusion

Pharmaceutical excipients for ODT still represent a new concept in Thailand. However, there is no research identifying factors affecting the purchasing decision regarding pharmaceutical excipients for ODT. This study investigates the relationship between five factors: financial, marketing, production, innovation as well as government policy and drug regulation, and the decision to purchase from the Thai pharmaceutical industry. The results are ranked in order of importance, with financial factors (beta = 0.458) and government policy and drug regulationfactors (beta = 0.180), being first and second, respectively. The prototype of pharmaceutical excipients for ODT is considered in relation to costs, profits, and meeting the registration criteria of the Thai FDA. Respondents are interested in pharmaceutical excipients for ODT, which has the potential to adopt this innovation into the market.